How planning for Inheritance Tax now could save your loved ones stress in the future

This is becoming more relevant as more families are expected to be affected by IHT in the coming years.

According to Money Marketing, the number of estates liable for IHT could rise to more than 37,000 by 2027, with the total IHT bill expected to approach £9 billion. 

You might not think of yourself as someone who needs to worry about IHT. However, your home, savings, investments, and pensions can all add up.

With IHT thresholds frozen and asset values rising over time, your estate may be worth much more than you initially realise.

Planning ahead could help you reduce a future tax bill. Just as importantly, it could make things less stressful for your loved ones when the time comes.

With this in mind, continue reading to discover why it may be worth thinking about IHT sooner rather than later, and some practical steps that could help protect your family’s financial future.

More of your wealth could be subject to Inheritance Tax than you thought

IHT is typically charged at 40% on the part of your estate that exceeds your available allowances. As of 2026/27, the “nil-rate band” – the amount you can usually pass on before IHT is due – stands at £325,000.

You may also benefit from the “residence nil-rate band” if you leave your home to direct descendants, such as children or grandchildren. This is currently £175,000.

Moreover, married couples and civil partners may be able to pass on up to £1 million if both partners’ allowances are available.

This might sound like a lot, but property values alone can bring many families closer to the threshold than they expect. In fact, Plumplot states that the average property price in the south-west of England is £353,000 in August 2026. 

This would already have exceeded your base nil-rate band. 

It’s also vital to remember that, from April 2027, most unused pension funds and death benefits are expected to form part of your estate for IHT purposes. This could make a significant difference if you’d planned to leave pension wealth to your loved ones.

Of course, this doesn’t mean you need to panic or make rushed decisions, just that it might be worth reviewing your position now while you still have the time to plan carefully.

Planning early could give you much more choice

Perhaps the greatest benefit of planning for IHT sooner rather than later is that it gives you more options.

If you wait until later in life, you may have fewer opportunities to reduce the value of your estate or pass wealth on in a way that suits your family. 

Starting earlier means you can think calmly about what you want your money to achieve. For instance, you might want to:

• Help children or grandchildren with a house deposit
• Support loved ones with education costs
• Make regular gifts from surplus income
• Leave money to charity.

Lifetime gifting can be especially meaningful as it allows you to see loved ones benefit from your wealth while you’re still here. 

Just remember that it’s vital not to give away more than you can realistically afford. You still need to think about your own retirement income, possible later-life care costs, and emergencies.

Rather than guessing here, a financial planner could help you understand what you may need for your own future first before you help others.

Gifting can be a practical way to reduce the value of your estate, but the rules require care

Gifting is one of the more common ways to reduce a potential IHT bill. 

In 2026/27, you can usually give away up to £3,000 each tax year using your annual exemption. If you didn’t use last year’s exemption, you may be able to carry it forward by one year. 

You can also make small gifts of up to £250 to as many people as you like, provided you haven’t used another exemption for the same person.

Larger gifts may also fall outside your estate if you survive for seven years after making them, which are known as “potentially exempt transfers”. 

Read more: What are “potentially exempt transfers” and how could they help you mitigate Inheritance Tax?

While these rules can be helpful, they can also be confusing at times. For instance, a gift that might seem straightforward at the time may create complications later if you don’t record it properly or your circumstances change.

As such, keeping clear records could make life much easier for your executors.

It can help to note what you gave, when you gave it, who received it, and which allowance or exemption you intended to use.

This might feel like a small admin task now, but it could save your loved ones a great deal of stress later.

We could help you plan ahead with confidence

IHT planning can feel uncomfortable, but at the end of the day, it’s about looking after the people you love. 

Thinking ahead could help you reduce a potential tax bill, make better use of your allowances, and give your family greater confidence at a difficult time.

At Hansford Bell, we can help you understand whether IHT could affect your estate and the steps that may be suitable for your circumstances.

Read more: How a financial planner could offer valuable guidance through the entire estate planning process

We can also use sophisticated cashflow modelling software to show whether you could afford to make gifts during your lifetime without putting your own standard of living at risk.

This could help you make decisions with confidence knowing you’re supporting your loved ones while still protecting your own future.

If you’d like to talk more about your estate plan, please call us on 01822 617 960, email info@hansfordbell.co.uk, or fill in our online contact form, and we’ll be in touch.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 

The Financial Conduct Authority does not regulate tax planning or cashflow planning.