Inheritance Tax (IHT) is often called the 'voluntary tax' because with proper planning, it can often be reduced significantly or even eliminated entirely. With the nil-rate band frozen at £325,000 until at least 2030, more UK families than ever are affected.
1. Know Your Threshold: The IHT nil-rate band remains at £325,000 in 2026. If your estate is worth more than this, your beneficiaries may have to pay 40% tax on the excess. However, married couples and civil partners can transfer their unused allowance to each other, potentially doubling the threshold to £650,000.
2. Use the Residence Nil-Rate Band: If you leave your main home to your direct descendants, you may qualify for an additional allowance of up to £175,000. Combined with the standard nil-rate band, this could mean up to £500,000 per person (or £1 million for couples) is tax-free.
3. Make Use of Exemptions: The annual exemption allows you to give away £3,000 per year tax-free. You can also make small gifts of £250 per person, and gifts for weddings or civil partnerships. Regular gifts from surplus income are also exempt.
4. Consider Trusts: Placing assets into Trust can remove them from your estate for IHT purposes after seven years. Different types of Trust suit different situations, and we can advise you on the best option.
5. Review Your Will Regularly: Tax laws change, and so do personal circumstances. The 2026/27 tax year brings no changes to IHT thresholds, but the government has signalled potential reforms. Reviewing your Will and estate plan regularly ensures you're taking advantage of all available reliefs.
At Castle Family Legal, we specialise in helping families navigate the complexities of Inheritance Tax. Get in touch for a free consultation to discuss your circumstances.
