Inheritance tax

We want to help maximise the inheritance you leave to your heirs. To achieve this goal, it’s important to review what inheritance tax (IHT) could be payable, identify any exemptions and reliefs, and – crucially – plan ahead.

Your heirs will pay inheritance tax at the current rate of 40 per cent on the net value of any assets you own on your death, over the available nil rate bands. Any assets you have given away in the previous seven years will also be liable for inheritance tax.

The available nil rate bands are the standard nil rate band (NRB), which is worth £325,000, and the residence nil-rate band (RNRB), which is worth £175,000. Both of these allowances have been frozen until April 2026. 

The standard NRB can be allocated against the value of any assets in the death estate. The NRB is allocated to gifts in the seven years preceding death in priority to the assets in the death estate.

The RNRB was introduced on 6 April 2017. It is a specific allowance that may only be applied to the value of residential property that was, at some point, occupied as the owner’s home. For the RNRB to apply, the residential property must be inherited by direct descendants of the deceased, such as children (including adopted children and stepchildren) and grandchildren.  

The RNRB is generally only available where the relevant residential property is owned at the time of death. However, there are special provisions that apply where the deceased either downsized, sold or gave away a residence on or after 8 July 2015. 

When planning to minimise inheritance tax liabilities for your family there are a number of exemptions and reliefs from IHT, to be considered. These include:

  • the spouse exemption;
  • business property relief; and
  • agricultural property relief.

You could also consider donations to charity. However, all of these have conditions attached to them. By relying on out-of-date advice or common misconceptions, it is easy to fail to qualify. Our specialist team based across the UK and worldwide has the experience and knowledge to effectively help you plan ahead and avoid inheritance pitfalls. We can help you maximise the amount that you leave to your heirs, without leaving a mess for your executors to sort out on your death.

The earlier we start planning the better

Through careful planning, RSM can help you manage your IHT position. We can work in partnership with you to plan ahead and review your will(s) to ensure that these are drafted in a tax-efficient way. We can also assist if you own assets overseas, or are a UK resident non-domiciled individual, where it might also be necessary to take advice in overseas countries. We can ensure that the wills drafted in each country do not contradict one another, and that you can make the most of the advantages provided by double tax treaties. We can also help you consider alternative structures for holding assets to reduce IHT liability. In some cases, the use of trusts or personal investment companies may be appropriate.

To discuss the ways in which RSM can help you plan in advance to maximise the value your heirs receive, please get in touch with Karen Clark or Eugenia Campbell.

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