To some it just seems like a tax on already taxed wealth.

Depending on your personal views, Inheritance Tax is regarded by many as a wholly unjust tax, especially if you have paid tax on your earnings throughout your life. To some it just seems like a tax on already taxed wealth.

In 2017, HMRC raised a record-breaking £4.9bn from Inheritance Tax, and research from TIME Investments revealed that 36% of the population aged 55 and over that seek financial advice from an Independent Financial Adviser have not considered Inheritance Tax planning, despite the tax charge being 40% of a qualifying part of the estate.

For Inheritance Tax planning to be effective, ideally it should be done with intergenerational planning in mind, rather than on an individual basis. Instead of considering the transition of assets to your children alone, it is worth considering how your grandchildren and even great grandchildren may benefit. It is an area where expert advice from an Independent Financial Adviser can prove invaluable.

Inheritance Tax planning inevitably involves thinking about how much income you need in retirement and how long this income needs to last. Once you have established this, a financial adviser can help you work out whether your income needs can be met based on your available assets.

When and if there are surplus assets, Inheritance Tax needs planning should be considered. The use of Trusts can be very effective as they are exempt from Inheritance Tax, however, once the assets are placed in a trust to some extent you lose some control of them, but not always.

In relation to property, the nil rate band remains at £325,000, meaning that if your estate exceeds that amount, the excess would be liable for Inheritance Tax. However, the government has introduced the Residence Nil Rate Band (RNRB) from April 2017, which gives homeowners a further £100,000 before being subject to Inheritance Tax. This is further set to increase annually by £25,000 until 2020.

We all know the saying ‘you can’t take it with you’ or as one of my clients says to me ‘remember, you are not, Tutankhamun. You aren’t going to be buried with it’. Even with this in mind is essential to be sure that your pot still will last until the end.

Intergenerational planning is about striking a balance between ensuring that you always have sufficient income to cover different needs at various stages of their life and the transition of assets to the next generation. If you like, sharing the family’s wealth both for today and for the future.

How much tax will your estate have to pay?

Total Estate Inheritance Tax Payable Effective rate on estate
£400,000 £30,000 7.50%
£500,000 £70,000 14.00%
£600,000 £110,000 18.30%
£800,000 £190,000 23.75%
£1,000,000 £270,000 27.00%
£1,500,000 £470,000 31.30%
£2,500,000 £870,000 34.80%


If you are married, you benefit from two nil rate bands and 2 Residential Nil Rate Bands. The effect rates of tax will therefore be reduced. Nevertheless, as you can see from table above, the amounts of tax payable can be HUGE.

What planning options do you have?

There are a number of options that you can use to mitigate against Inheritance Tax and by using a combination of them, the amount of tax due can be reduced significantly.

The list below are a few of the options that are worthwhile considering if the tax your estate will have to pay or will cause difficulties for your family is too high for your comfort.

  1. Use your annual exemptions
  2. Make gifts to charity
  3. Make use of Qualifying Business Relief investments
  4. Make use of Trusts to hold your investments
  5. Make gifts to your family
  6. Use life insurance to provide funds to pay the Inheritance Tax
  7. Make regular gifts out of income

Action Call

Are you concerned about Inheritance Tax? Not sure what you can do to reduce the problem?

Contact us to today. We can review your current situation and let you know what options are available to you.

If you would like to talk to about financial planning, please get in touch for a no-obligation meeting. Go to our website and contact us via our “Get in touch” form on our home page or Contact Martin Dodd on 01902 742221.

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It is advisable to take advice from a professional financial adviser when making major financial planning decisions.

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This article has been prepared in good faith and based on Midlands Investment Agency’s understanding of the law and interpretation thereof at the time of creation. The contents should not be regarded as specific advice and we always recommend that specific advice is sort from a qualified professional. No responsibility can be accepted by Martin Dodd or Midlands Investment Agency Ltd., for any loss that may occur by a person acting or refraining from acting on the basis of this article.