Inheritance Tax: The Squiggle Approach

When it comes to Inheritance Tax, most firms start with the tax. We start with your family. This factsheet explains how we support your IHT mitigation plans, and why we do it in the order we do.

Why Inheritance Tax matters more than ever

The number of families caught by Inheritance Tax is rising, and will continue to rise for years to come. There are three reasons for this.

First, the main tax-free threshold, the nil rate band (NRB) of £325,000 has been frozen until April 2031. When thresholds do not move but asset values do, more estates tip over the line.

Second, from April 2027, unused pension funds and most pension death benefits will fall within a person's estate for Inheritance Tax purposes. For many people who have spent years using their pension as an inheritance vehicle, this changes the maths significantly.

Third, reliefs for business and agricultural assets were changed in April 2026. The unlimited 100% relief that business owners and farmers previously enjoyed has been replaced by a cap: each person now has a £2.5 million allowance for full relief, with only 50% relief above that. AIM-listed shares, which previously qualified for 100% relief after two years, now only attract 50% relief.

These changes, taken together, mean that more families than ever will face an Inheritance Tax bill, and the right approach to planning has never mattered more.

Four ways to deal with Inheritance Tax

Before diving into our approach, it is worth setting out the full range of options. At the simplest level, there are four things you can do about an IHT liability:

There are many ways of achieving these. Our Inheritance Tax Mitigation factsheet outlines the main specific options in detail, lifetime gifts, the family home, pensions, trusts, and investments. No single factsheet can cover every strategy, but it provides a foundation for discussion with a specialist.

The two aims of legacy planning

When we talk about legacy planning, there are two distinct things most people want to achieve. They are related, but they are not the same:

Both can be achieved, and for many clients we help achieve both. But here is the critical point: chasing tax efficiency before securing protection can leave your estate exposed to risks that dilute it far more than Inheritance Tax ever would.

When we ask clients which of these two aims matters more to them, the vast majority, by some distance, say protecting their beneficiaries' inheritance.

Inheritance Tax at 40% on the estate above the threshold is significant. But a child losing their inheritance to a divorce settlement, or a surviving spouse's remarriage redirecting the family home to a new partner, can remove all of it. Protection first, tax second.

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Our three-phase approach

We have developed a structured, sequenced approach to estate planning that achieves both aims without sacrificing one for the other.

Phase 1, Establish a base plan

We begin by establishing a solid base: a simple discretionary trust (a trust where the trustees decide how best to use the assets for your chosen beneficiaries, within the limits you set), either set up now as a lifetime arrangement or written into your Will to take effect on your death.

Your Will is drafted so that your assets are directed into that trust structure on the first death, or the second, depending on your circumstances and what gives you the best protection. From day one, your beneficiaries are protected. If you were to die while longer-term tax planning is still being explored, your wishes are respected and the inheritance is sheltered from the "what ifs" mentioned above.

This matters more than it might seem. Tax planning can take months, or even years, to settle on and put in place. If you do not yet have a base plan, the risk is that you die in that gap, before the tax planning is complete, with no trust protection at all.

Phase 2, Explore IHT mitigation

With your estate secured, you can explore, discuss and cost a comprehensive IHT plan. This might involve:

This stage typically involves an independent financial adviser or tax specialist, your own, or one we introduce you to. It takes time to get right, and the options are often complex. That is fine. Your base plan means there is no race against time.

Phase 3, Make both work together

Once your tax plan is settled, we ensure your estate planning and your IHT plan work as one. This might mean:

The result is an estate plan that achieves protection and tax efficiency together, in the right order.

A hypothetical example

Imagine Richard and Catherine, both in their late sixties. Richard has recently retired and has a significant pension pot; Catherine owns a buy-to-let property in addition to their home. They have three adult children and two grandchildren.

Their estate is worth over £1.5 million between them, and they are aware that IHT is likely to be a significant issue, particularly after the April 2027 pension changes bring Richard's unused pension into scope.

They come to Squiggle wanting to "sort out their IHT problem." Our advice is to start with Phase 1: establish a Will and trust structure that protects everything for each other and for the children, regardless of what happens. Phase 1 was completed within a few weeks; timescales vary with complexity.

In Phase 2, Richard and Catherine work with an independent financial adviser (introduced through Squiggle) over the following months to review Richard's pension nominations, explore a discounted gift trust with some of their savings, and consider a life assurance policy written in trust to cover the estimated IHT bill. The adviser models several scenarios and they make decisions at their own pace; there is no rush because Phase 1 is already in place.

In Phase 3, Squiggle co-ordinates with the adviser to put a lifetime trust in place alongside the existing Wills, update the Will trusts to fit the new structure, and ensure the TRS registration deadlines are met. Richard and Catherine end their planning with both full beneficiary protection and a meaningful reduction in the likely IHT on their estate.

Outcomes depend on individual circumstances, asset values, and the law at the time. This is a hypothetical example for illustration only.

Common mistakes people make

Starting with the tax. Many people arrive at estate planning having read something about IHT-efficient investments or having been sold a product designed to reduce their estate. Some of these work; some do not. But all of them are Phase 2 and Phase 3 thinking applied before Phase 1 is in place. The right order matters.

Waiting until it feels urgent. Many families come to Squiggle because someone has been diagnosed with an illness, or has just received a large inheritance, or has just read about the pension changes. Acting under time pressure narrows your options significantly. Earlier is almost always better.

Making gifts without advice. Gifts that could reduce your estate for IHT may trigger other problems, capital gains tax on an asset that has risen in value, for example, or a gift that is challenged if you need care within a few years. Always seek advice before making significant gifts.

Treating the pension as untouchable. Before April 2027, many people were told not to touch their pension because it was IHT-free. After April 2027, that advice needs revisiting. The right pension withdrawal strategy has changed for many people.

Assuming the nil rate band protects them. At £325,000 per person (or up to £1 million for a couple making full use of both the NRB and RNRB in the right circumstances), the thresholds sound generous. But property values, savings and pensions can push estates well beyond these figures, particularly in the South East.

Step-by-step: how to get started

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This factsheet is general information for England and Wales, not legal, tax or financial advice. Last reviewed: June 2026.