Leave a legacy with Inheritance Tax
Inheritance Tax (IHT) is a major part of estate planning, usually when IHT needs to be paid, it’s already too late to do anything about it. By planning early you can make sure it’s managed correctly, which could lower the value of your estate, and in turn, any future IHT bill.
What is Inheritance Tax?
Inheritance Tax is a tax on the assets that belong to you when you die. Assets include the total of everything owned by you and a share of anything owned jointly.
Here are the most common assets:
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Personal property
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Property/Land
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Shares
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Securities
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Cash
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Future inheritances
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Chattel (any tangible personal property that is movable)
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Life insurance death benefits not in trust
Newcastle Financial Advisers can help you plan ahead with this complex matter and help leave your loved ones what they deserve. They can take you through the ways in which you can lower Inheritance Tax, such as:
Gifting some of your wealth away can help lower the value of your estate if managed correctly.
It can be complicated...
The rules surrounding gifting are extensive; the best thing to do is to speak to a Financial Adviser about Exempt Gifts, Potentially Exempt Transfers (PET) and Chargeable Lifetime Transfers (CLT) to find out what would be the best option for your situation.
If you want to make sure your loved ones receive a payout as soon as possible, combined with sensible Inheritance Tax planning, then you may need to think about Trusts. Moving some of your wealth into a trust can sometimes lower Inheritance Tax.
Trusts should be a key part of your estate planning. But, depending on your needs these can be complex, you may need legal advice too.
Trusts are not regulated by the Financial Conduct Authority nor the Prudential Regulation Authority.
Taking out a life insurance policy to pay some or all of an Inheritance Tax bill, can make things easier when it comes to sorting out your estate.
It can help protect your home from having to be sold to pay the Inheritance Tax.
You can cut down on Inheritance Tax on your estate if your life insurance policy is written in trust during your lifetime. Make sure you speak to a financial adviser as this may not be the best option in all situations.
Even with inheritance tax planning, everyone should have an up-to-date will.
If a person dies without a will in place their husband, wife, or civil partner could eventually receive most of the estate, but not all of it. Without a will, the whole process will be slowed down and your loved one's may not get all of what you wanted them to inherit.
If you are divorced you’ll need to consider the effect this will have on who is named as executors and beneficiaries in your will. This can become complicated, so it is important to get professional advice.
Will writing is not regulated by the Financial Conduct Authority nor the Prudential Regulation Authority.
Leaving a part or all of your estate to charity can lower, and sometimes even remove Inheritance Tax liability.
Leaving something to charity in your will means it won’t count towards the total taxable value of your estate. This is known as leaving a ‘charitable legacy’.
If you leave at least 10% of your ‘net estate’ to a charity, you can lower the Inheritance Tax rate on the rest of your estate from 40% to 36%.
Why is inheritance tax planning important?
To make sure a larger part of your estate is passed on to your loved ones, inheritance tax planning is very important, as it lowers the taxes on your assets. If inheritance tax isn't planned properly, your family could face financial challenges due to unexpected tax charges. By planning in advance, you can make sure you are giving financial security to your family, helping them keep their lifestyle and meet future financial needs.
What is the inheritance tax threshold?
At its simplest, IHT is a 40% tax created on your assets upon death that applies to the amount by which your estate goes over the nil-rate band, which is currently £325,000 for the 2025/2026 tax year. Your overall estate will include any gifts made in the seven years preceding your death (unless the gifts are covered by exemptions).
There are plenty of perfectly legal steps you can take to protect your family’s wealth from the taxman. The inheritance tax solutions include annual exemptions, allowances, direct gifts and trusts. Of course, there are many different options to choose from – so it’s important you find one that’s right for you. With this in mind, and the fact that inheritance tax can be a complex subject, it’s worth speaking to a financial adviser. They can point you in the right direction, guide you through the complexities – and help you put the best plan in place for you.
Who does inheritance tax effect?
A wide range of people can be effected by inheritance tax, especially for those who are homeowners, business owners, and those with investments. Individuals who have received large gifts or inheritances within the last seven years before the donor's death could also be affected. Even if you think your estate falls below the current threshold, future growth in property values and investments could mean your estate is pushed into the taxable bracket. Successful estate planning helps you to better control the amount of tax you are liable to pay on any wealth you accumulate over your lifetime.
The nil-rate band
Every individual has a nil-rate band, which means you’re allowed a certain amount of assets before you have to pay IHT. For the tax year 2025/2026 the nil-rate band is £325,000 per individual. If your estate is worth more than this your executor may be liable to pay tax at a current rate of 40%.
Currently it’s possible to pass on £325,000 without paying IHT. However, that can be boosted by a further £175,000 called the Residential Nil Rate Band if you are passing a family home on to family members.
Cut down your IHT
There are a range of options that could help cut down the potential IHT tax liability in the future. Investing a little time and effort now means you can have peace of mind knowing that the people you want to leave your possessions and wealth to will not be faced with an unexpected bill to pay on your death.
A few examples of these options are gifting, charitable donations and taking advantage of your annual exemption allowance. However, this is complicated area and taking financial advice is important.
How can Newcastle Financial Advisers help you manage Inheritance Tax
Making informed decisions about how you pass on your wealth is a positive and empowering thing to do. We understand there is a lot to think about. That's why Newcastle Financial Advisers are here to explore the options available to you, have conversations and put a plan in place.
They will talk to you about your personal circumstances, taking the time to understand what's important to you and your wishes. They will explore ways to lower Inheritance Tax, such as exemptions and limitations, annual gift allowances, using trusts, life insurance policies, donating to charity. By using a trusted financial adviser, you will also avoid costly mistakes if your estate is not handled properly.
There is no obligation to act on the advice given to you. If you don't know how much your estate might have to pay or how to lower it, Newcastle Financial Advisers can assist you.
How much does inheritance tax planning cost?
We believe financial advice should be accessible to everyone. That’s why having an initial chat with a Newcastle Financial Adviser is free of charge.
There will only be costs to the advise if you choose to carry out the plans your financial adviser has suggested. There will be flexible follow-up service options and various fee coverage methods to suit your needs. Learn more about what it costs to receive advice from Newcastle Financial Advisers.
Inheritance Tax guide
To learn more about estate planning, view or download our Leaving a legacy guide, (PDF 114kB).
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HM REVENUE AND CUSTOMES PRACTICE AND THE LAW RELATING TO TAXATION ARE COMPLEX AND SUBJECT TO INDIVIDUAL CIRCUMSTANCES AND CHANGES WHICH CANNOT BE FORSEEN. ASPECTS OF INHERITANCE TAX PLANNING ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY NOR THE PRUDENTIAL REGULATION AUTHORITY. WILL WRITING AND TRUSTS ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY NOR THE PRUDENTIAL REGULATION AUTHORITY.
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