Inheritance Tax (IHT) planning is one of those topics that’s easy to put off – but with the changes announced in last year’s Budget, now’s the time to take a fresh look at your estate planning. Whether you’re trying to protect family wealth or make sure your legacy is passed on smoothly, these ten tips will help you stay ahead of the curve.
1. Know your thresholds
Let’s start with the basics. The nil-rate band is still £325,000, and the residence nil-rate band is £175,000. That means a couple can pass on up to £1 million tax-free – if their estate qualifies. But with these thresholds frozen until 2030 and property values rising, more estates may become liable to IHT
2. Keep an eye on AIM shares
Alternative Investment Market (AIM) shares used to be a favourite for IHT planning thanks to Business Property Relief (BPR). But from April 2026, only 50% of the value of AIM shares (and some other assets) will qualify for relief. If you’ve got AIM shares in your portfolio, now’s a good time to review your investment strategy.
3. Reassess farmland relief
Agricultural Property Relief (APR) isn’t as generous as it used to be. If you own farmland but don’t actively farm it, you might not qualify anymore. And from April 2026, APR and BPR will be capped at £1 million per person for 100% relief – with anything above that only getting 50% relief. Is it time for a rethink?
4. Pensions are now in the IHT mix
This one’s big: from April 2027, pensions will be included in your taxable estate. If your pension passes to your spouse, there’s no IHT. But in other cases, the pension trustee will need to account for IHT. If you’ve been relying on your pension as a tax-free inheritance tool, it’s time to revisit your plan.
5. Make the most of lifetime gifting
You can still give away £3,000 a year tax-free – and more if you survive seven years after the gift. Plus, regular gifts out of surplus income can fall out of your estate immediately (no seven-year wait), as long as they’re part of a pattern and don’t affect your lifestyle.
6. Consider trusts (or alternatives)
Trusts can be a smart way to control how your wealth is passed on, but they come with their own tax rules and complexities, so it’s worth getting expert advice.
If trusts aren’t your thing, a family investment company might offer similar benefits with fewer strings attached. Either way, get advice to ensure you get the best outcome.
7. Review your will (yes, again)
If your will hasn’t been updated in a while – or if your family or finances have changed – it’s time for a refresh. A clear, up-to-date will is one of the best tools in your IHT planning kit. And while you’re at it, consider discussing it with your family to avoid surprises later.
8. Don’t overlook life insurance
A life insurance policy can help cover any IHT bill, so your loved ones don’t have to sell assets to pay it. It’s a simple, effective solution that’s often forgotten.
9. Get organised for probate
Since April 2024, executors no longer need to take out commercial loans to pay IHT before probate. That’s a win – but only if your paperwork is in order. Make sure your records are clear and accessible to avoid delays and make it easier for your loved ones.
10. Make IHT planning a habit
Don’t treat IHT planning as a one-and-done task. Set a reminder to review your estate, gifting, and tax position every year – especially as new rules come into play.
Final thought
There’s no magic trick to avoid IHT completely, but with a bit of planning – and the right advice – you can protect your family’s wealth and leave a legacy that lasts. The rules may be getting tougher, but smart planning still goes a long way.
