Registered number: 10816512.
Registered office: Squiggle Consult Ltd, Suite 2069, Letraset Building, Wotton Road, Ashford, Kent, TN23 6LN
Squiggle Consult Ltd. is a limited company registered in England and Wales.
Creating wealth takes enterprise. Keeping it in the family takes planning. Inheritance Tax (IHT, the tax charged on your estate when you die, and sometimes on certain lifetime gifts) does not have to be inevitable. There is a wide range of long-established strategies based on statutory reliefs and exemptions that can significantly reduce the bill your family faces, but no single method is a complete solution, and the right mix depends entirely on your circumstances.
This factsheet outlines the main IHT planning routes, current as of June 2026. It is general information, not advice. Always take professional advice before acting.
Before looking at mitigation strategies, it helps to be clear on what you are working with.
Imagine Margaret, a widow whose late husband's allowances were fully used on his death, with a £900,000 estate. Her home is worth £400,000 and she has one adult daughter. Her estate exceeds her NRB (£325,000) and she can claim the RNRB (£175,000) because the house passes to her daughter. Her total tax-free allowance is £500,000. The taxable estate is £400,000, producing an IHT bill of £160,000 (£400,000 × 40%). With planning, that bill can potentially be reduced significantly; the sections below explain how.
This is a hypothetical example for illustration only.
Be realistic. Never put tax savings ahead of maintaining the lifestyle you want. The best plan is one you can actually live with.
Be flexible. Circumstances, families and tax law all change; your arrangements should be able to change too. Rigid structures put in place years ago can cause problems if family relationships shift or legislation moves on.
Keep it simple. If a simple solution works, it is usually the best one. Complexity has a cost in professional fees, ongoing administration and the risk of things going wrong.
Gifting assets during your lifetime is one of the oldest and most effective forms of IHT planning. The key is understanding which gifts are immediately exempt and which carry a seven-year survival requirement.
The following gifts leave your estate at the moment you make them, with no strings attached:
Most other outright gifts to individuals, transferring cash, property or other assets directly to a person, are called potentially exempt transfers, or PETs. The word "potentially" is the key: the gift is fully exempt if you survive seven years from the date you make it. If you die within seven years, the gift is brought back into your estate for IHT purposes.
An important clarification: tax on the gift itself is only charged where the total value of gifts you have made in the seven years before death exceeds your £325,000 NRB. If your gifts in those seven years are below £325,000, no tax is charged on them even if you die; the effect is simply that those gifts use up part of your NRB, leaving less to set against the rest of your estate.
Where the seven-year gifts do exceed £325,000, taper relief reduces the effective IHT rate on the excess the longer you survived after the gift:
Taper relief applies to the rate, not the value of the gift. It reduces the tax payable on the excess above £325,000 only. It is not a relief on the full value of the gift in all cases.
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The family home is often the biggest single asset in an estate, and one of the most emotionally loaded. It is also the hardest to plan around. Strategies exist, but each carries risks.
Equity release allows you to unlock value from your home without selling it, but it is a regulated financial product, and advice must come from an FCA-authorised adviser. Squiggle is an estate planning consultancy and does not provide financial advice. The IHT impact of equity release depends on how the released funds are then used.
Gifting the home and paying full market rent is sometimes suggested as a way to move the property out of your estate. HMRC scrutinises these arrangements closely. If you continue to benefit from the property (for example, by living in it rent-free or below market rate), the gift is likely to be a "gift with reservation of benefit", which means it stays in your estate for IHT purposes as if you had never given it away. If you do pay genuine market rent, that rent becomes income in your child's hands and creates its own tax consequences.
Co-ownership with a resident family member can sometimes work in genuine cases, for example, where a child has genuinely moved in and contributed to the purchase, but again, HMRC watches for arrangements that exist primarily for tax purposes.
The RNRB itself is often the simplest relief for the family home. Make sure your Will is drafted to use it effectively, and watch the £2 million taper if your estate is near that level. Note that the RNRB can still apply where you have downsized, there are specific "downsizing addition" rules.
One risk worth naming: "sideways disinheritance." Once your home passes to your children, whether on death or by lifetime gift, it is theirs. That means it can be exposed to their divorce, their bankruptcy, or their own estate if they die before you. A trust in your Will can protect against this, keeping the home (or its proceeds) within the family line even if your children's circumstances change.
Pension death benefits were, for many years, a famously IHT-efficient inheritance route. Many families built their estate plans around leaving pension funds untouched, living off other assets, and passing the pension pot to the next generation free of IHT.
That picture has changed decisively. For deaths from 6 April 2027, most unused pension funds and death benefits will fall within a person's estate for IHT. This is now law. Spouse and charity exemptions remain, meaning pension funds still pass between spouses without an IHT charge, but for wider inheritance they are now taxable like any other asset.
The practical implications are significant:
This is one area where specialist, personal advice is essential. The right response depends on the size of your pension, your other assets, your family structure and your income needs in retirement. Please do not make changes to your pension without taking advice from an FCA-authorised financial adviser (for investment decisions) and an estate planning specialist.
Trusts (legal arrangements where assets are held by one person, the trustee, for the benefit of others, the beneficiaries) have been a cornerstone of IHT planning for decades. The right trust depends on your age, health, income needs and overall estate.
Mistake 1: Setting up a trust and then ignoring it. Trusts require ongoing administration, trustee meetings, proper decision-making, accounts and sometimes tax returns. An abandoned trust can be ineffective or create problems.
Mistake 2: Choosing trustees without thinking it through. Trustees have legal duties and can be held liable for poor decisions. Choose people who are organised, trustworthy and, ideally, not all in the same household.
Mistake 3: Using trusts without reviewing the rest of the plan. A trust is one piece of the jigsaw. It needs to sit alongside your Will, your LPA, your pension nominations and your life cover to be truly effective.
Certain investments carry statutory IHT reliefs after a qualifying period. These reliefs changed significantly from April 2026.
Business Relief (BR) applies to shares in qualifying unlisted trading companies, certain partnership interests, and shares listed on AIM (the Alternative Investment Market, which lists smaller, growing companies). Agricultural Relief (AR) applies to agricultural land and property used for farming.
From April 2026, the rules were reformed. Each person now has a £2.5 million combined allowance for assets qualifying for 100% BR or AR. Above that £2.5 million allowance, the relief reduces to 50%, meaning half the value above that threshold is still chargeable to IHT.
AIM shares used to attract 100% Business Relief after two years of ownership. They now attract only 50% relief, making them less IHT-efficient than before, though still considerably better than no relief at all.
Enterprise Investment Scheme (EIS): EIS shares can qualify for Business Relief after two years of ownership, but they are subject to the same reformed rules: 100% relief within the £2.5 million allowance and 50% relief above it.
Any unused part of the £2.5 million allowance is transferable to a surviving spouse or civil partner, giving a couple up to £5 million of 100% relief between them. How best to use it still needs specialist advice.
Important: Squiggle does not provide investment advice. Decisions about AIM portfolios, EIS investments or other tax-favoured investment structures must be made with an FCA-authorised financial adviser. Capital is at risk with all investments, and the availability of tax reliefs depends on individual circumstances and the investment meeting qualifying conditions at all relevant times. Tax reliefs may change.
Imagine Robert, who owns a 30% shareholding in an unlisted trading company worth £800,000 and holds a qualifying AIM portfolio worth £1.8 million. Together that is £2.6 million of potentially relievable assets, £100,000 above the new £2.5 million allowance. The £2.5 million within the allowance attracts 100% relief (no IHT). The £100,000 above it attracts 50% relief, meaning £50,000 is chargeable. At 40%, the IHT on that portion is £20,000. Without these reliefs, the IHT bill on £2.6 million would be very substantially higher. Robert should review his overall estate in light of the reformed rules and discuss whether any restructuring makes sense with a financial adviser and his estate planner.
This is a hypothetical example for illustration only.
For those with substantial property portfolios or larger estates, more complex structures may be appropriate. These are not solutions for everyone (they require time, professional input and ongoing management), but they can be highly effective in the right circumstances.
Incorporation: transferring a genuinely managed lettings business into a limited company. If the properties genuinely constitute a trading business (rather than passive investment letting), the transfer may be possible with a capital gains tax rollover, and the company structure opens the door to further planning. However, stamp duty land tax, existing mortgage restrictions, lender consents and HMRC's view of whether a "business" (rather than mere investment) actually exists all need careful checking beforehand.
Family Limited Partnerships (FLPs): a partnership structure into which you contribute assets. You retain management control as general partner (and thus control the assets and income), while gradually gifting partnership interests to family members over time. The interests typically attract a valuation discount because of the restrictions on minority partners, which can reduce the value being transferred for IHT purposes. Complex and highly regulated, professional legal and accounting input is essential throughout.
Family Investment Companies (FICs): a private limited company set up to hold family wealth (investments, cash, property). You typically hold "alphabet" shares or preference shares as director, retaining control and income rights. Family members (including children) hold shares that carry the growth. Useful for families wanting to pass wealth to the next generation while retaining control. The cost of setting up and running a company means this structure is generally only viable for estates above roughly £500,000 in investable assets.
These structures are complex, highly technical, and take specialist knowledge and time to set up properly. They also require ongoing professional input. They are mentioned here so you know they exist, not as DIY options.
Sometimes the best IHT planning is the simplest. A few points worth keeping in mind:
Waiting too long. The seven-year clock on PETs, the need for ongoing gifts out of income, and the time to set up trusts all mean that delay costs real money. Starting sooner gives more options.
Planning in isolation. IHT planning that ignores the Will, the pension nominations and the LPA is incomplete. A gift that reduces IHT can inadvertently disinherit someone if the Will is not updated to reflect it.
Giving away too much. People sometimes give away so much that they become dependent on their children. That creates family tension and, if the child then divorces or faces bankruptcy, can leave the parent without the assets they relied on.
Ignoring the RNRB taper. Estates just above £2 million can lose the RNRB entirely. Strategic lifetime gifts or charitable bequests may bring the estate back under the threshold, but this needs careful modelling.
Not reviewing after major life events. Marriage, divorce, birth of grandchildren, a business sale, a property purchase, a change in pension value, all of these can significantly alter the IHT picture. Your estate plan should be reviewed every two to three years and after any major change.
Overlooking pension nominations. With pensions coming into IHT from April 2027, outdated nomination of benefits forms could produce unintended results. Review them now.
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Every strategy here depends on personal circumstances; take professional advice before acting.
This factsheet is general information for England and Wales, not legal, tax or financial advice. Last reviewed: June 2026.
Registered number: 10816512.
Registered office: Squiggle Consult Ltd, Suite 2069, Letraset Building, Wotton Road, Ashford, Kent, TN23 6LN
Squiggle Consult Ltd. is a limited company registered in England and Wales.
