5 ways a financial planner could help you mitigate Inheritance Tax

Inheritance Tax (IHT) is a hot topic right now because the number of families paying it, and the average bill, are rising.

According to Today’s Wills and Probate, IHT receipts were £7 billion between April 2024 and January 2025 – an increase of £0.7 billion on the same period the previous year.

We have seen this rise because the “nil-rate band” – the amount of wealth you can pass on without IHT – has been frozen since 2009. The “residence nil-rate band”, which you may benefit from when passing on a property, hasn’t increased since 2020. The chancellor has confirmed both nil-rate bands will remain at their current levels until at least April 2028.

Meanwhile, the average value of your estate may be rising as house prices go up and you generate growth on your savings and investments.

This means more of your estate could exceed the threshold, resulting in a higher IHT bill for your family. Additionally, planned changes to the tax treatment of pensions from April 2027 could mean more of your wealth is subject to IHT.

As such, it may be more important than ever to plan ahead and find ways to mitigate IHT.

Here are five ways a financial planner can help you achieve this.

1. Understanding your liability

Although IHT is in the news a lot, there is still a distinct lack of understanding about the specific rules around the tax.

A survey reported by FTAdviser revealed that 71% of UK adults don’t know how IHT works. This means that many people are unaware of how much IHT their estate is likely to face.

One of the key benefits of working with a financial planner is that we can explain the difficult IHT rules in clear language, so you understand precisely how you will be affected. Once you know the scale of the issue, we can look at ways to reduce IHT.

2. Making sure you’re using all available allowances and exemptions

When you pass away, the executor of your will adds up the total value of your estate to calculate whether any IHT is due. Fortunately, there are several allowances and exemptions you can take advantage of, which may reduce the IHT bill.

This includes:

The nil-rate band – The first £325,000 of your estate is automatically IHT-free.
The residence nil-rate band – You can benefit from up to £175,000 in addition to your basic nil-rate band when passing your main home to a direct descendant such as a child or grandchild.
Spouse or civil partner exemption – You can pass your entire estate to your spouse or civil partner free from IHT, and they can transfer any unused nil-rate bands to their own estate.
Business and agricultural property relief – Certain business or agricultural assets are partially exempt from IHT.

These are just some of the key IHT allowances and exemptions, but there are other minor rules that apply in specific circumstances too. We can help you understand how they might apply and the interplay between them so you can use all available allowances effectively.

3. Helping you take advantage of complex gifting rules

Passing wealth to your loved ones while alive is a common strategy for mitigating IHT, but the gifting rules can be confusing.

You have an annual gifting allowance of £3,000. Anything up to this threshold immediately falls outside your estate for IHT purposes. However, you also have additional allowances if you’re gifting wealth for a wedding, and there are separate rules for small or regular gifts.

Any payments you make outside these allowances are considered potentially exempt transfers (PETs) and only become IHT-free after seven years.

If you pass away within seven years, there may be some IHT payable.

All gifts to qualifying charities are also exempt from IHT, and if you donate at least 10% of your estate in your will, your beneficiaries will pay IHT at a reduced rate of 36% instead of the standard 40%.

Using these gifting rules could help you reduce the IHT your loved ones pay. However, any mistakes could lead to unexpected tax liabilities for your family later on.

With our support, you can take full advantage of gifting and avoid falling foul of the complex rules.

4. Exploring the benefits of trusts

A trust is a legal agreement that allows you to pass assets to a third party, who then manages them on behalf of your beneficiaries.

As you no longer own an asset once it is placed in a trust, it’s treated differently for IHT purposes. In some cases, this could help you reduce the tax liability of your estate. That said, trusts don’t negate IHT altogether and there may be some tax to pay, albeit at a reduced rate.

There are many different types of trusts, each with their own benefits and rules, to get your head around. In some cases, trusts might not be a suitable option for your estate plan at all.

We can discuss this with you and explore the benefits of trusts. If we think a trust is right for you, we can refer you to professionals who can help set it up.

5. Facilitating important estate planning conversations with your family

IHT planning is typically easier if you work with your beneficiaries.

For instance, you might talk to your children about their financial situation, and whether they would benefit from lifetime gifts rather than waiting to inherit from your estate. Having this conversation means you can better support them while also mitigating tax.

Equally, if you’re benefiting from certain allowances and exemptions, the executor of your will may need to provide evidence of this to HMRC when calculating how much IHT is due. Discussing this with them now may mean the executor is less likely to make costly mistakes.

We can facilitate these conversations, giving guidance about important topics and explaining the tax implications of your plans. Ultimately, this means the whole family can work together to mitigate IHT.

Get in touch

If you’re concerned about the IHT your family could pay on your estate, we can support you.

Please contact us at hello@ardentuk.com or call or WhatsApp us on 01904 655 330. As an award-winning financial advice company with advisers included in the 2025 VouchedFor Top Rated guide, you can be sure that we’re a bona fide company providing excellent advice and high-quality service.

Please note

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

The Financial Conduct Authority does not regulate estate planning, tax planning, trusts, or will writing.