Tax, investments and pension rules can change over time so the information below may not be current. This article was correct at the time of publishing.

Five steps to beat Inheritance Tax in the UK

Inheritance Tax is the tax that your beneficiaries pay on your estate when you die. In the 2020/21 tax year, subject to other reliefs being available, anything over £325,000 will potentially be taxed at 40%. You can inherit any unused allowance from your partner/spouse and pass on a maximum of £650,000 tax free.

Inheritance Tax is becoming an issue for an increasing number of families due to rising house prices.

Find out more about Inheritance Tax

Inheritance Tax Planning is often put off by families who are not wanting to raise the subject of dying with their loved ones. Doing so early on will give you greater peace of mind and will help you to protect your family’s finances.

Many Inheritance Tax bills are avoidable, with the end of the tax-year fast approaching it is important that you make the most of your tax exemptions and reliefs in this tax year.

Contact us for a no-obligation meeting to discuss tax reliefs

Estate planning is a vital part of Inheritance Tax Planning. Before you begin to develop a strategy to mitigate Inheritance Tax, you need to consider our goals. You should establish who you want to pass your Estate onto. You should have conversations with your family in advance, so they are aware of your intentions. A Financial Adviser at Four Wealth Management may suggest that you gift some of the money to your family now rather than on death as it may be more tax-efficient.

Everyone’s financial situation is different so a tailored plan is required to help you mitigate Inheritance Tax.

Find out more about Estate Planning

Below are some of the options that can help your family and reduce the impact of Inheritance Tax.

1. Start gifting assets to your family

Giving money and assets to your family while you are alive will enable you to see your family benefit from these as well as reducing a future IHT bill. You can give away up to £3,000 per year as well as making small gifts to other individuals of £250. These gifts are exempt from Inheritance Tax as they fall outside of your estate immediately.

You could consider using these gifts towards your child or grandchild’s future. In the 2020/21 tax year £9,000 can be contributed to a Junior ISA and sheltered from tax (anyone can contribute but only a parent or legal guardian can set one up). They can access the money from the age of 18.

It is also possible to utilise any unused gifting allowance from the previous tax year. By combining individual contributions and the allowance from the previous tax year, a couple can potentially gift up to £12,000 by 5th April.

2. Give away excess income

A commonly unused Inheritance Tax exemption is regular gifts from excess income. There is no limit to the amount of money you can gift from excess income provided that the gifts do not affect your standard of living.

If this is an exemption you wish to utilise, get in touch with one of our financial advisers as you need to ensure all records of the gifts are kept accurately to make sure that the gifts are exempt from Inheritance Tax upon your death.

3. Save into your pension

Pension assets are normally outside of your estate and therefore not normally subject to Inheritance Tax. This means when you retire you should consider using other assets to provide you with a retirement income rather than using your pension straight away.

If you die before the age of 75 the proceeds of your pension is usually paid to your beneficiaries tax free. If you die after 75, beneficiaries will need to pay tax at the same rate as their income.

4. Make sure your Will is up to date

A Will is a document that states what you want to happen to your estate when you die. Your possessions, property and money are all part of your estate. A Will can help make sure that your wishes are carried out after death and your estate is distributed how you wanted.

Many couples leave everything to each other as this usually shelters the assets from Inehritance Tax.

It is important that you regularly review your Will and make sure that it reflects any changes in your personal circumstances or legislation.

Please note that the writing of a Will involves the referral to a service that is separate and distinct from St. James’s Place.

Please note that Wills are not regulated by the Financial Conduct Authority.

Find out more about making a Will

5. Buy life insurance in a Trust

It isn’t always possible to fully mitigate Inheritance Tax. One option is to take out a life insurance policy where the sum insured covers the likely Inheritance Tax bill. By placing this into Trust could mean that your family do not have to sell any assets in order to pay the bill. This is because assets in Trust fall outside of your estate.

Plan ahead

It is Important to plan for the future even if it seems a long time away. Planning in advance will give you time to explore your options and utilise available tax reliefs and allowances available to you. This will help you to structure your finances in the most tax-efficient way possible.

Contact us for a no-obligation meeting to discuss IHT planning


The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief generally depends on individual circumstances.

Will writing involves the referral to a service that is separate and distinct to those offered by St. James’s Place. Wills and Trusts are not regulated by the Financial Conduct Authority.

Enquire Now

If you have any queries or would like to arrange a face to face meeting with an adviser for a no obligation review of your personal finances, simply book a call back using the form below. Alternatively, you can call us on 0117 973 0500.

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Five steps to beat Inheritance Tax in the UK
FourWealth Management