Wealth of Advice, Swale House, Mandale Business Park, Durham, DH1 1TH
As retirement approaches, many people shift their focus from simply building wealth to protecting and passing it on. In this episode of Retire Well with Wealth of Advice, we talk through the key principles of inheritance tax (IHT) planning and what you can do now to pass on more of your wealth effectively and tax-efficiently.
Property, savings, and investments (and soon maybe pensions) can create a sizeable IHT liability if left unchecked. But with some thoughtful planning, you can make sure your money ends up in the hands of those you want to benefit, not the taxman.
Inheritance Tax is charged on your estate when you pass away. Your estate includes:
Pensions are currently excluded from your estate. However, this is likely to change in April 2027 with the Government currently conducting a review.
Everyone benefits from a Nil-Rate Band (NRB) of £325,000. If you own a home and pass it on to a direct descendant, you may also qualify for the Residence Nil-Rate Band (RNRB) of £175,000.
For married couples, allowances can be combined—meaning up to £1 million could potentially be passed on without paying IHT.
However:
Currently:
From 2027, unused pensions may be included in your estate for IHT purposes. While the details are still being finalised, it’s wise to start planning now.
Make a Will
Without a will, the laws of intestacy decide who inherits your estate—and that rarely lines up perfectly with your wishes. A will ensures your assets go where you want and helps avoid unnecessary tax.
Nominate Pension Beneficiaries
Pension death benefit nominations (sometimes called "expression of wish" forms) ensure your pension provider knows who should receive your pension pot if you die. These sit outside your will and need to be kept current.
Set Up a Lasting Power of Attorney (LPA)
Not strictly about IHT—but essential. LPAs allow trusted individuals to manage your affairs if you’re no longer able to. This includes decisions about finances, health, and welfare.
Larger gifts are usually potentially exempt transfers or chargeable lifetime transfers—they drop out of your estate after seven years.
A simple and effective way to cover a potential IHT bill. These policies are usually placed in trust, so the payout doesn’t add to your estate.
Trusts can be useful for:
However, they come with legal and tax implications, so professional advice is essential.
If you own a qualifying business or certain types of shares, Business Relief can reduce their IHT value by 50% or 100%. It’s particularly useful if you hold:
Be aware that from 2024, Business Relief is limited to £1 million per person, with a 50% relief rate on anything above that.
Inheritance tax planning doesn’t need to be complicated—but it does need to be proactive. Start by getting the basics in place: a valid will, up-to-date nominations, and a clear understanding of your estate. From there, more advanced tools like gifting, trusts, and pensions can help you tailor your legacy according to your wishes.
If you want a better view of what your future could be, we'll have a chat and work out if we make a good fit for you and your financial picture.
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