All about inheritance tax planning

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    All about inheritance tax planning

    Inheritance tax planning is a crucial part of your financial plan. Often people avoid addressing the problem until it’s too late – or sometimes, ignore it altogether! The reality of the situation is, you can never be too prepared, and the sooner you start planning, the better.

    Our approach to our customers is simple and straightforward, meaning we won’t overwhelm you with jargon or throw meaningless numbers at you. Instead, we’ll sit down with you and get to know you so that we can work together to create the best inheritance tax plan for you and your loved ones.

    Intergenerational planning is an equally important part of your financial plan. We see inheritance tax planning as ‘preparing your money for your loved ones’ and intergenerational planning as ‘preparing your loved ones for your money’. For the purposes of this blog, we will just be focusing on inheritance tax planning.

    So, let’s take a look at what’s involved with inheritance tax planning.

    What is inheritance tax planning and why do I need it?

    In simple terms, your inheritance is what you leave behind once you pass. This is known as your ‘estate’ and will include your property, savings, investments and potentially other assets too. Unfortunately, there are cases where your estate can’t be handed over to your beneficiaries, due to inheritance tax. However, with a robust, ongoing plan, we can minimise your inheritance tax liability and ensure that your wealth is used to look after the people and causes you care about.

    It’s important to plan efficiently due to certain inheritance tax thresholds, which will tax a percentage of your estate. The threshold for inheritance tax for is £325,000 per person or £650,000 for a couple.

    In addition to this, each individual who owned a property at their time of death that was their main residence can benefit from an additional Residence Nil Rate Band (RNRB) of £175,000 in the 2021/22 tax year. This means that if your estate is being passed to direct descendants you could benefit from a total nil rate band of £500,000 for an individual or £1 million for a couple.

    Inheritance tax rates

    Once the value of your estate is above the threshold, you will then be liable for tax, but only on the amount which takes you over the threshold. The inheritance tax rate can change, depending on the circumstances. The standard rate, which is charged to the amount above your threshold, is 40%. However, if you leave more than 10% of your estate to charity, the rate will be reduced to 36%.

    The earlier you start your inheritance tax planning, the better you can take advantage of the various allowances and ensure your money leaves a powerful legacy.

    Using the tax rates to decipher exactly what your inheritance tax liability is allows you to make more informed decisions on how to divide up your assets once you pass. It also allows you to identify areas for tax relief.


    For example, if you’ve given away an asset as an outright gift, it may be taxed. Unless it’s an exempted gift, in which case, ‘taper relief’ will mean that your liability for tax on that gift could be less than 40%. It’s only classed as a gift if it has value or has lost value as a result of it being transferred, such as selling a car to a family member for less than it’s worth, for example.
    Taper relief depends how long before death the gift was made. This is outlined in the table below.

    Years between gift and deathTax paid
    less than 340%
    3 - 432%
    4 - 524%
    5 - 616%
    6 - 78%
    7 or more0%

    Business relief

    There are also tax relief opportunities for assets that are passed on as part of a business, and this is called ‘business relief’. This will allow the assets to be passed on either completely free of inheritance tax or with a slightly reduced rate. Receiving agricultural relief is also an option if your estate includes woodland areas. Your beneficiaries will not be responsible for arranging the payment of inheritance tax. This will be done by an ‘executor’ as outlined in your will, or by the person who is dealing with your estate.

    How can Equilibrium help?

    Organising your estate and getting your affairs in order is extremely important and the sooner you start, the more effective your inheritance tax plan will be. You want the wealth you’ve worked hard for to go to the people and causes you care about. The friendly experts at Equilibrium can help you to identify your goals and create a plan to achieve them.

    A robust financial plan can help you to secure the life you want and navigate the obstacles you encounter through the different stages of life. Our holistic financial planning service combines wealth management, investment management and tax planning to provide one seamless service that can help provide you and your loved ones with peace of mind.

    If you would like to learn more about how your inheritance tax plan can give you the power to look after those you love and leave a lasting legacy, please give us a call today on 0808 156 1176 or email us through the contact form on our website.

    With offices in Wilmslow and Chester, we’ve made the lives of over 1,200 clients better all over the UK, including Liverpool, Manchester, Sheffield and Birmingham.

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