Inheritance Tax (IHT) is often viewed as something to think about later on in life. It can feel distant, complicated and easy to put off while you focus on building your career, supporting family and growing your finances. With rising property values, frozen thresholds and more wealth being passed between generations, IHT is becoming relevant to more families than ever before.
Understanding IHT now isn't about predicting the future, it's about being aware of what you might inherit, how it could be affected by tax and how your own financial decisions today could shape the legacy you leave behind. Even a family home or pension savings could one day push an estate over the threshold.
Why early awareness matters
Planning at this stage is less about making big changes and more about building awareness. Knowing the basics helps you ask the right questions, both about your own long-term plans and those of the people closest to you. Have Wills been kept up to date? Are beneficiaries named correctly? Would your family know what to do if something unexpected happened?
With further rule changes ahead, including pensions becoming more closely tied to IHT from April 2027, understanding how different assets fit together is becoming increasingly important.
Family conversations
Just as important as financial planning are the conversations that go alongside it. Open discussions about intentions and expectations can make a real difference for everyone involved. They can:
- Reduce uncertainty
- Avoid future conflict
- Give family members confidence in your plans.
These discussions don't need to be detailed or formal. Simply starting the conversation can help families feel more prepared and aligned.
The value of professional advice
IHT rules are complex and change over time, and not every option will be right for every family. We can help you understand what applies to your situation, bring generations into the conversation if required and create a plan that provides clarity, confidence and reassurance for the future.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority does not regulate Will writing, tax and trust advice and certain forms of estate planning.
Tax legislation and rates can change, and their application depends on individual circumstances.
Passing on wealth – the essentials of IHT
- IHT is a tax charge based on the value of someone's estate when they die, though currently any transfer to a surviving spouse or civil partner is exempt
- An estate includes property, savings, investments, personal possessions and other assets held in the deceased's name
- Currently, estates worth more than £325,000 may be taxed on the amount above this level
- The standard IHT rate is 40%, although this can reduce to 36% if at least 10% of the estate is left to charity
- There is an extra allowance (£175,000) when leaving a main residence to direct descendants (children, stepchildren or grandchildren), which can increase the tax-free amount
- The tax is usually paid by the executor(s) of the estate before assets are distributed to beneficiaries
- Making lifetime gifts, within certain rules and allowances, can help reduce the value of an estate over time
- In some cases, placing assets into trusts may help with passing on wealth while keeping a level of control, but this can be complex
- Planning ahead may help reduce the amount of tax due, but the rules can be complicated
- Seeking professional advice can help ensure you understand your options and make informed decisions for yourself and your family.
Gifting and trust strategies can have tax implications and may not be suitable for everyone. Trust planning can be complex and may trigger tax charges depending on individual circumstances.