What is Inheritance Tax planning?
Inheritance Tax Planning is about putting proactive planning in place to make sure your Estate is held and passed down to your beneficiaries in the most tax-efficient way possible. Family wealth is often subject to Inheritance Tax as it passes down each generation, eroding that wealth for you and your loved ones over time.
However, Inheritance Tax is largely a voluntary tax, which can be legitimately mitigated, meaning you no longer have to worry about losing 40% of your wealth on death. All of this is achievable with the right expert guidance, utilising Trust Laws, and true Estate Planning.
Trusts have been enshrined in English Law for Centuries and exist to protect your wealth so that the right money really does go to the right people, at the right time and then stays there!
“We had reached our 70’s and realised that we needed to ensure our estate was not open to possible extra taxation costs and security for our direct family. We attended a Redwood seminar and decided to take further advice. They were very profesional, patient and understanding. They treated us with respect and kept everything in simple laymen’s terms.” Graham S., September 2025
Get in touch with us today to review your financial situation.
Why Inheritance Tax planning matters
Your personal wealth is the result of a lifetime of hard work and careful saving. It would be sad to see a significant portion of it lost to tax when you’re gone, which is why Inheritance Tax planning is so important.
Proper estate and tax planning can reduce Inheritance Tax, ensuring that more of your wealth goes to your loved ones, in accordance with your wishes. It can also help you make gifts during your lifetime without creating future tax problems.
Working with an experienced estate planner, like Redwood Financial, can give you much-needed peace of mind by reducing your IHT liability and reducing the risk of legal challenges down the line.
How Redwood Financial can help you reduce your Inheritance Tax liability
We will start by reviewing your financial situation to get a picture of your assets, pensions, life insurance and property. Then we can produce a bespoke plan designed to reduce unnecessary tax exposure.
This may include strategies such as:
- Making lifetime gifts
- Putting Trusts in place
- Investing in IHT-exempt assets
- Reviewing your Will to ensure it still aligns with your wishes
We will work closely with you to understand what truly matters to you. This will enable us to create a plan that reflects your values and your story, not just your assets. You can expect genuine, jargon-free advice to help you make confident decisions about your legacy.
Making the most of available exemptions and reliefs
There are allowances and exemptions that may help to reduce your Inheritance Tax liability, and we will ensure you make full use of any that are available to you.
These include:
- Nil Rate Band (NRB): £325,000 per person tax-free allowance
- Residence Nil Rate Band (RNRB): Up to £175,000 if you leave your main home to direct descendants
- Spousal exemption: Transfers between married couples or civil partnerships are exempt from IHT
- Charitable giving: If you leave 10% or more of your estate to charity, your IHT rate could drop from 40% to 36%
- Annual gift allowance: You can gift up to £3,000 each tax year without those gifts being counted towards their estate for Inheritance Tax purposes
Structuring gifts and trusts efficiently
Giving ‘gifts’, like assets or cash, away during your lifetime can be an effective way to reduce IHT, but you must structure it properly and time it well.
We can help you to understand:
- The seven-year rule for potentially exempt transfers
- The use of Discretionary or Bare Trusts to protect assets from premature gifting
- How to manage Inheritance Tax while keeping access to your income
Example: A couple decided to share their wealth early by giving £100,000 to each of their two children and placing another £300,000 into a discretionary trust. They both went on to live for more than seven years after making these gifts, so the money was no longer counted as part of their estate for IHT purposes. This brought the total value of their estate below the taxable threshold, meaning their family inherited the whole estate tax-free, saving around £160,000.
Business relief for Inheritance Tax
If you own or invest in a qualifying business, you can receive valuable Business Relief (sometimes called Business Property Relief) to reduce or even eliminate Inheritance Tax on certain business assets. For example:
- 100% relief on a business or shares in an unlisted trading company
- 50% relief on assets such as land, buildings, or machinery used by the business
Example: When the owners of a family-run manufacturing business worth £600,000 started thinking about succession, they faced a choice: sell the company, gift it during their lifetime, or pass it on after they died. After taking estate planning advice, they decided to keep the business in the family because it qualified for full Business Relief, exempting the entire £600,000 from Inheritance Tax. This meant their children could inherit the company without a large tax burden, keeping their legacy alive for future generations.
Inheritance Tax advice you can trust
With over a decade of experience and thousands of happy clients, Redwood Financial has earned a reputation for expertise and genuine care.
We combine our expertise in both Estate Planning and Financial Planning to tackle your Inheritance Tax liability on both fronts. Bringing the two disciplines together means you will gain a more comprehensive understanding of all the different ways to legitimately mitigate your Inheritance Tax bill and save you and your loved ones 40%. Contact us today.
FREE Wills & Trusts Webinars
To find out more, we always recommend that you start by attending one of our FREE 40-minute Wills & Trusts Estate Planning Webinars. This will give you a good insight into what is involved before you even embark on your Inheritance Tax Planning journey.
Frequently asked questions – Inheritance Tax Planning services
What is Inheritance Tax (IHT)?
Inheritance Tax is a tax paid on the Estate (the property, money, and possessions) of someone who has died.
What is the threshold for Inheritance Tax?
We each have an Inheritance Tax Allowance of £325,000. If your estate exceeds this threshold, it’s usually subject to Inheritance Tax at 40% upon your death.
Your unused Inheritance Tax Allowance can pass to your spouse or civil partner, meaning that couples have a total Inheritance Tax Allowance of £650,000.
In addition to this, since 2017, the Residential Nil Rate Band Allowance has been introduced. This allows you to claim an additional £175,000 of tax-free allowance if you give away your home to your children (including adopted, foster or stepchildren) or grandchildren.
This means your Inheritance Tax threshold can increase to £500,000 or £1,000,000 for a couple. There are many pros and cons to claiming this extra Inheritance Tax Allowance, which you need to be aware of before committing, so please make sure you take advice from our qualified estate planners.
There is usually no Inheritance Tax to pay if either:
– The value of your Estate is below the £325,000 threshold.
– You leave everything above the £325,000 threshold to your spouse, civil partner, a charity, or political party.
Even if the Estate value is below the threshold, you will still need to report it to HMRC through Probate.
What are the current Inheritance Tax rates?
The standard Inheritance Tax rate is 40%. It’s only charged on the part of your Estate that’s above the tax-free threshold.
Example
– Your Estate is worth £700,000
– Your tax-free threshold is £325,000 + £175,000 of Residential Nil Rate Band Allowance = £500,000.
– The Inheritance Tax charged will be 40% of £200,000 (£700,000 minus £500,000)
– Meaning £80,000 IHT is due
The Estate can pay Inheritance Tax at a reduced rate of 36% if you leave 10% or more of your Estate to charity in your Will.
When is Inheritance Tax due?
Inheritance Tax must be paid within six months of your loved one’s death, and interest will start to be charged by HMRC thereafter.
Typically, the taxes on an inheritance will be taken out of the deceased’s Estate. Usually, the deceased will have appointed an Executor in their Will to take care of this. However, HMRC expect to be paid before Probate is granted, and other than some exceptional cases, the beneficiaries have to make arrangements to settle the Inheritance Tax bill before they can receive their Inheritance and recoup the Inheritance Tax bill value.
If someone dies without a Will in place (Intestate), then the legal heir will have to designate someone to administer the Estate.
What if no Inheritance Tax is due?
If no Inheritance Tax is due, you will still have to report to HMRC and provide an Estate Value calculation. For this reason, the first thing to do when someone dies is to calculate the total value of the Estate. This is the role of the Executor or appointed Administrator.
