Inheritance Tax Planning – How to Keep More in the Family

A Practical Guide to Protecting Your Legacy

“How much of my estate will actually reach my family after I’m gone?”

It’s a question many business owners and high-net-worth individuals ask as they approach retirement. You may have a will, but that alone won’t shield your estate from Inheritance Tax (IHT), which can claim up to 40% of everything above the tax-free threshold.

This guide outlines the key milestones and tools to help you plan smarter, act earlier, and keep more in the family, without giving too much away to HMRC.

What Happens If You Do Nothing?

Let’s say your estate is worth £1 million (including property, shares, and business assets):

·         £325,000 Nil Rate Band (NRB)

·         £175,000 Residence Nil Rate Band (RNRB)

·         Remaining £500,000+ taxed at 40% = £200,000+ to HMRC

And with the NRB frozen until at least 2028, your estate may grow with inflation—but your tax-free allowance won’t.

GOV.UK – Inheritance Tax Overview

IHT Planning Checklist

Use this as a starting point to assess your current position:

Step 1: Know Your Allowances

·         £325,000 NRB per person (transferable between spouses)

·         £175,000 RNRB for passing the family home to direct descendants

·         Tapering applies for estates over £2 million

Step 2: Review Your Will

·         Is it up to date?

·         Does it reflect current IHT rules?

·         Does it maximise spousal and RNRB allowances?

Step 3: Start Gifting Early

·         £3,000 annual exemption

·         £250 small gift exemption

·         Gifts from surplus income (must be regular and documented)

·         Potentially Exempt Transfers (PETs) – IHT-free after 7 years

Step 4: Consider Trusts

·         Use Discretionary Trusts for flexibility

·         Explore Loan Trusts or Discounted Gift Trusts for income and IHT savings

·         Trusts can protect assets while retaining control

GOV.UK – Types of Trusts

Step 5: Assess Business Property Relief (BPR)*

·         Up to 100% IHT relief on qualifying business assets

·         Applies to unlisted shares, AIM stocks, and trading businesses

·         Does not apply to investment or rental property businesses

* Note: As of July 2025, proposed reforms to Business Property Relief (BPR) are expected to take effect from 6 April 2026. Under the proposed changes, 100% relief will be available only on the first £1 million of qualifying assets, with any excess receiving 50% relief.

GOV.UK – Business Relief for Inheritance Tax

Common Mistakes to Avoid

·         Assuming your business qualifies for BPR without checking trading status

·         Leaving gifts undocumented

·         Failing to update wills after major life events

·         Overlooking the impact of rising property values on RNRB eligibility

Why Early Planning Pays Off

Starting early gives you:

·         More control over how and when assets are passed on

·         Greater access to reliefs like tapering and BPR

·         Peace of mind for your family

·         Protection against future tax policy changes

Let’s Build Your IHT Strategy Together

At Wright Vigar, we help clients:

·         Understand their IHT exposure

·         Explore trusts and gifting strategies

·         Maximise Business Property Relief

·         Align estate planning with personal and business goals

Speak to our estate planning team today, your legacy deserves more than guesswork.