Inheritance Tax Planning Solicitors

Introduction

One of the most important questions clients ask us is: How can I reduce my inheritance tax liability? With robust estate planning, you can safeguard your assets now – and protect your estate and beneficiaries after your death.

More estates than ever are liable for inheritance tax – and it’s not just the wealthiest. It’s vital to seriously consider how you can mitigate the potential inheritance tax due on your estate.

A sure-fire way of allowing HMRC to recover the maximum inheritance tax is to die intestate – i.e. without a valid will. But a well-drafted will, regularly reviewed, can significantly reduce (or even avoid) any inheritance tax payable on death.

Inheritance tax is charged at 40% of the value of the estate exceeding the £325,000 threshold (subject to various exemptions and reliefs, including a further possible relief of £175,000 for those leaving a property to their lineal descendants). With wise planning you can significantly reduce your inheritance tax liability, freeing up more cash for your loved ones.

You do need to take specialist advice from estate planning lawyers who understand the complexities of inheritance tax and the wider tax framework. The experienced team at Osbornes Law provides the incisive support you need to effectively protect your wealth from future tax liabilities. We are also experts in international estate and tax planning .

What is Inheritance Tax?

Inheritance tax may be payable on death if the estate exceeds a certain threshold. The current threshold (also known as the nil rate band) is £325,000 – it has remained at this level since April 2009 and is frozen until at least April 2028. So, if your net estate exceeds £325,000 on death, the excess could be taxed at 40%.

Your executors will be liable to account for any inheritance tax due on the estate before the Grant will be issued. Where inheritance tax falls due on any lifetime gifts made before death, the recipient may be personally liable to pay the tax.

It is a common misconception that inheritance tax is a concern only for the most wealthy. However, more estates than ever now exceed the threshold, largely because of the steep rise in property values in recent years. In fact, the Institute for Fiscal Studies think tank has predicted around 7% of estates could be liable for inheritance tax by 2032 (up from just over 4% in the year to April 2022).

The need to consider taking specialist advice on mitigating inheritance tax has never been greater.

Another common mistake is believing that if you give away substantial assets or lump sums of cash now, you will reduce the amount of inheritance tax due on death. While you can make certain gifts during your lifetime without any tax implications, this depends on several factors such as the value and purpose of the gift, your relationship to the recipient and when it was made. Always take specialist advice before considering giving away your wealth.

• Read our related post: Gifting Property to Children

Take care not to fall into the trap of thinking that a single round of inheritance tax planning will remain sufficient to protect your estate. As your circumstance change and as tax thresholds and reliefs alter, it is vital to keep matters under review.

Inheritance Tax reliefs and exemptions

The availability of various valuable exemptions and reliefs provides a sound framework on which to plan how to minimise inheritance tax liabilities on death:

• Spousal exemption – Gifts made to your spouse (or civil partner) are exempt from inheritance tax. This means that value of any property or other assets left to your spouse will not be considered for the purposes of inheritance tax. NB: this spousal exemption may be limited to £325,000 where a spouse is domiciled abroad.
• Transferable nil rate band – Each individual has a £325,000 nil rate band on death (inheritance tax is charged at 0%) but the full value might not be used up. Their surviving spouse (or civil partner) can add any unused element to their own nil rate band.
• Residential nil rate band – This allowance is available if you leave a single residential property to your children and or grandchildren. This is currently £175,000 and is subject to a ‘taper’ which applies if the net estate is worth over £2m.

If you own more than one residential property on death, your executors will need to nominate which will qualify for the exemption. Any unused element can also be transferred to the estate of the surviving spouse/civil partner in the same way at the individual nil rate band.

• Charities – The charitable exemption is significant. Any charitable legacies to UK charities and political parties are exempt from IHT. Further, if you leave at least a tenth of your net estate to charity, any inheritance tax payable on your estate will be charged at a reduced rate of 36%.
• Business or agricultural property relief – Business relief may be applied on the market value of business assets left in your will. The relief is either 100% or 50% depending on the nature and extent of the asset/s and how long you owned it for.

If you leave farming and agricultural land and property under your will, your executors may be able to claim 100% or 50% agricultural relief.

The government recently announced significant and controversial changes to business and agricultural property relief from next year. Particularly, from 6 April 2026 100% relief from inheritance tax will be limited to the first £1m of combined agricultural and business property.

We know this announcement has caused major concern among farming communities, particularly where families will be left wondering, for example, how they might be able to free up cash to pay inheritance tax on a parent’s death. Our specialist estate planning solicitors are able to explain how the revised framework could impact your business and farming assets and your beneficiaries, and what steps you can consider to protect your interests.

Lifetime gifts – Inheritance tax planning is not just about what happens after death; it’s about making the most of your assets now. Making lifetime gifts not only benefits the recipient, it can be highly effective in reducing the value of your estate for inheritance tax purposes.

There are two types of lifetime gifts to consider:

Gifts with no risk of inheritance tax

• gifts of up to £250 per year to anyone you wish.
• gifts of up to £3,000 in total per year. This can be carried forward for one year.
• Gifts out of excess income. The gift must be part of your normal expenditure and be made out of your after tax income without affecting your usual standard of living.
• Gifts on marriage – the amount you can give depends upon the relationship between you and the recipient.

Potentially exempt transfers

• Gifts exceeding the allowances named above could attract inheritance tax liability if you die within 7 years of the gift. Taper relief is available if the gift exceeds the available nil rate band and the donor survives for at least 3 years.

Benefits of Early Inheritance Tax Planning

Planning how best to deal with your assets in the most tax efficient way is complex but vital. It is wise to consider what immediate steps you can take to minimise your potential tax liability on death, as well as any longer-term steps that may be prudent.

Your aim will be to conserve as much of your estate as possible for your loved ones. The most effective way to achieve this is by maximising all exemption and reliefs available to you. This could be through setting up family trusts, writing a new will and making gifts now or in the near future.

It is important to approach matters holistically, taking into account your own personal circumstances and needs and those of your family, and your intentions under the terms of your will. This means having a full and frank discussion with our team and allowing time to craft and implement the most effective strategies to meet your needs.

We are also mindful of the need to minimise any risk of disputes arising during your lifetime, as well as potential post-death challenges to your will. The last thing you want is to take robust steps to minimise inheritance tax, only for your assets to be funding potential litigation after your death.

Our team will take bold steps to assess the potential risks and to protect you and your estate from costly disagreements.

Services Provided by Inheritance Tax Planning Solicitors

Effective inheritance tax planning involves a range of legal skills together with a sound understanding of the dynamics of families and businesses, both domestic and international. Our services include:

• Reviewing estate assets – We will review the extent of your assets as well as your debts and liabilities; and consider the application and transfer of tax free exemptions and allowances to your estate.

• Advising on gifting strategies – Once we understand the nature and extent of your estate, and your personal circumstances, we can discuss the possibility of making lifetime gifts and how tax reliefs may apply.

• Setting up trusts – Establishing tax-efficient trusts now can be invaluable in managing and ring-fencing assets from inheritance tax while providing for your loved ones. You can choose the trustees to manage the trust (we can take on that role if you prefer professional trustees).

• Planning for business and agricultural property reliefs – If you run a business, a farm or other agricultural business, we can advise how the framework for business reliefs and exemptions may apply to your estate. These reliefs are soon to become less generous, but we can support farming and business clients on the most effective steps you can take to ensure the business can continue smoothly after your death.

• Non-domiciled and international inheritance tax advice – The rules for non-doms are complex and changing. From April 2025, a residence-based test will apply and the protection from inheritance tax on non-UK located assets will be removed for individuals who have been UK resident in 10 out of the last 20 tax years (except for some property trusts).

We can explain how this may apply to you in practice and what tax mitigation steps you would be wise to consider. Inheritance tax and similar death taxes in other countries may also have implications for your estate. You can be reassured that our specialist lawyers are experts in both domestic and international inheritance tax regimes.

• Charity donations – Philanthropy and charitable giving is a commitment we admire among many of our clients. Giving to charity, whether it’s regular life-time giving or one off donations or leaving a generous charitable legacy in your will, can significantly mitigate inheritance tax – while benefiting needy charitable causes.

We support clients who are considering making substantial charitable donations to ensure it is done formally with all necessary paperwork. We also help clients establish charitable trusts under the terms of their wills.

• Drafting and reviewing wills – No inheritance tax planning can be truly effective if it not kept under regular review. A well-crafted will can minimise your inheritance tax liability, however wills should be reviewed when changes in your financial or personal circumstances arise. We help clients review their wills – making changes if appropriate. Our aim is to ensure your latest will achieves your goals in the most tax-efficient manner.

• Filing IHT returns – Estate executors are required to file inheritance tax returns (and other tax documentation) with HMRC early in the estate administration. Further inheritance tax returns may also need to be submitted during the administration process, for instance if new assets or liabilities have been identified, or if assets have sold for more/less than their valuation for probate purposes.

Dealing with HMRC is not always straightforward; and filings can be complex. Our services include completing and filing tax returns and documentation with HMRC and responding to queries on clients’ behalf.

• Related reading: What to Do When Someone Dies

Key Strategies for Reducing Inheritance Tax

What are the most common strategies for minimising or avoiding inheritance tax? Several tax mitigation devices are possible, depending on your unique circumstances and needs. However, HMRC will not accept every attempted inheritance tax avoidance scheme and it is crucial to involve specialist lawyers who understand how the tax rules work practically.

The most important and robust inheritance tax mitigation strategies we employ are:

• Utilising the nil-rate bands – By maximising the individual nil rate band and residence nil rate band available to you, your surviving spouse or civil partner could reduce their own potential tax liability (potentially up to £1m).

You can downsize your home but still claim the residence nil rate band in respect of your former property (even if it’s in another country), and we can advise on this. The tax advantage is particularly generous if you own property in London or the South East of England.

• Lifetime gifts and the 7-year rule – If you have cash to spare, you might want to consider making lifetime gifts to reduce the value of your estate on death. While small gifts may be exempt from any tax liability, inheritance tax could arise if you make transfers within 7 years before your death (including transfers of assets into certain trusts).

While the recipient is liable to pay any inheritance tax, taper relief applies to reduce the tax payable depending on when the gift was made. If, for example, you gift £150,000 each to your three children –

• up to 2 years before your death – the full amount of inheritance tax may be charged (assuming the annual exemption has been used)
• 3-4 years before death – 80% of the full amount
• 4-5 years before death – 60%
• 5-6 years before death – 40%
• 6-7 years before death – 20%

Thought needs to be given to when the gifts are made when there are multiple recipients. In the example above if the three gifts are not made on the same date then the earlier gifts will use up the allowance first, and the last child to receive the gift would bear the burden of all of the tax.

Careful consideration needs to be given when you make substantial transfers of cash or assets. The practical application of the rules can be complex; and there is the potential risk of transfers being considered a deprivation of assets (such that the transfer could be overturned).

You need think about your motives for making lifetime gifts and we can then advise on how we can help you mitigate any problems arising later on.

• Charitable donations – Charitable donations and legacies are vital for the survival of charities across the UK. In fact, more people than ever are giving to charity in their wills. Crucially, gifts to charities – both inter vivos and under a will are exempt from inheritance tax, and if you leave at least 10% of your estate to charity any inheritance tax due on your estate is reduced.

Many clients take advantage of being able to ‘divert’ cash to their chosen charities – money that would otherwise end up in HMRC coffers.

• Trusts – Different forms of trust can be set up during your lifetime, or written into your will to take effect on death. Establishing a trust of money or property during lifetime can effectively ring-fence the trust assets and they may not be taken into account by your estate for inheritance tax purposes if they were set up more than 7 years prior to death. There are some exceptions to this rule where trust assets are taxed as part of a beneficiary’s estate so care needs to be taken when establishing a trust of this nature.

Setting up a lifetime trust is a common mechanism to mitigate inheritance tax. For example, clients frequently set up trust funds to pay for their children’s or grandchildren’s education, to provide for a disabled relative or provide funds for a house purchase. (Note the 7-year rule for chargeable transfers may apply if funds were put into trust within 7 years of death).

A well-structured will trust can also be used, for example, to provide a trust fund for your named beneficiaries; to protect your share in property from tax liabilities, from care home fees of a surviving co-owner and to preserve assets for children.

Wills trusts do need careful drafting, taking into account the wider tax implications, the trustees powers and also the interests of the beneficiaries –

• Business relief – Family-run businesses are given a measure of protection from inheritance tax under these reliefs, but it will become less generous in April 2026. The availability or relief depends in part on the business structure, how long you have owned the business and who you wish to take over the business on death.

Robust succession planning that takes into account the potential tax liabilities is vital for any business. We can assist you in considering how best to maximise business relief (and agricultural property relief) to benefit you and your business.

Legal compliance

Most individuals and business organisations are required to account to HMRC at least on an annual basis. If you have substantial assets or a complex estate comprising, eg business assets, a significant property portfolio or assets held abroad, compliance with HMRC can be highly daunting and challenging.

To avoid regulatory breaches and potential financial penalties, it is wise to seek the help of specialists to complete and file your inheritance tax return and other tax returns and documentation as required by HMRC. We can help you avoid traps for the unwary, such as capital gains tax implications on sales of valuable assets, and income tax on trust income.

Compliance with HMRC regulations is much more straightforward if you keep full, accurate and timely records of lifetime gifts, trust income and transfers, and sales or transfers of relevant assets. These records, over time, can also help indicate if further review of your wealth would be prudent in light of potential inheritance tax liabilities.

We can also assist with registering trusts under the Trust Registration Service and there are deadlines to comply with when a trust is established.

Why Choose Osbornes Law?

At Osbornes Law, our private client and estate planning team have years of experience advising clients, including high net worth individuals and business owners, with inheritance tax planning strategies. Our expertise has proved robust in preserving clients’ assets and protecting their loved ones.

We adopt a holistic approach: we are firmly client-focused and are proud that we maintain a continuing relationship with clients based on trust in our services. Our fee structure is clear and transparent from the outset and we keep clients fully informed if additional costs could arise.

Contact Us

Get in touch for robust advice and support for implementing effective inheritance tax mitigation strategies to protect your estate.

To speak with one of our solicitors, contact us by:

• Filling in our online enquiry form; or
• Calling us on 020 7485 8811