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 2026/2027 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. 

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 2026/2027 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.