Inheritance Tax Planning for Your Family

Inheritance tax planning for your family

The standard inheritance tax nil-rate band is £325,000 in 2026/27. The usual rate on the chargeable portion above available allowances is 40%. Exemptions, reliefs and previous gifts can change the calculation, so a property's value alone does not establish the bill. Read the government inheritance tax overview.

Prepare a schedule of property, savings, investments, debts and relevant lifetime gifts. Identify ownership rather than assuming all assets are shared equally. For inheritance tax planning in Solihull, begin with current values and flag uncertain items for review, including business interests, overseas connections and pension death benefits.

Check whether the home allowance applies

A residence nil-rate band of up to £175,000 may apply when a qualifying home passes to direct descendants. It is conditional and reduces by £1 for every £2 an estate exceeds the £2 million taper threshold. Check the residence nil-rate band guidance.

Unused allowances may be transferable between spouses or civil partners, potentially allowing a qualifying survivor's estate up to £1 million of combined allowances. This is a conditional maximum, rather than an exemption for every couple. Earlier gifts, the home's value, previous deaths and the beneficiaries named can affect the amount available.

Look beyond the headline calculation

Consider a simplified £700,000 estate with no debts, gifts or special reliefs that qualifies only for the £325,000 nil-rate band. Its excess is £375,000, producing illustrative tax of £150,000 at 40%. Different family facts could change the result substantially.

Then consider how the estate would obtain cash. The home may represent most of its value while expenses and tax need attention during administration. Review liquidity with the executor and appropriate advisers. A valuable estate can still be difficult to manage if documents are missing or assets cannot readily be sold.

Coordinate the will and other instructions

A will records the intended recipients of assets passing under it and appoints executors. Review it after marriage, divorce, bereavement or significant family changes. A suitably qualified legal professional can explain proposed wording and its interaction with ownership arrangements.

Pension nominations and some insurance or trust arrangements work differently from a will. Keep them aligned with your intentions, but do not assume one document controls every asset. Explain unusual arrangements to the people who may administer them and keep sensitive records secure. Executors should know where to find information without needing unrestricted access to your accounts now.

Protect your own position before making gifts

Estimate what you need for retirement, repairs, support costs and unexpected events before giving capital away. A possible tax saving does not compensate for losing money you later need. Consider how the calculation changes if a partner dies or returns disappoint.

The recipient's circumstances matter too. An outright gift changes ownership and may expose the asset to divorce, creditors or spending decisions. A trust may provide different controls, but creates legal, tax and administration questions of its own. Assess it for a clear family purpose rather than assuming it is a universal inheritance tax solution.

Include the pension changes from April 2027

HMRC states that most unused pension funds and pension death benefits will enter the inheritance tax estate for deaths from 6 April 2027. Exclusions and administrative requirements need to be considered for the pension concerned. Read HMRC's pension inheritance tax technical note.

This is a reason to reassess the estate, not an automatic instruction to withdraw a pension. Withdrawals can create income tax and move capital into a different part of the estate. Compare retirement security, tax consequences and beneficiaries' position before taking action based on an old assumption about pension treatment.

Make the plan usable by your family

Maintain a secure asset list, professional contact details and gift records. Tell executors where the will is held. Consider powers of attorney with a legal adviser, since authority during your lifetime and executorship after death serve different purposes.

Families in Solihull can use an inheritance planning meeting to assign responsibilities as well as explore tax. Agree who will refresh valuations and when the next review takes place. Clear records reduce uncertainty for relatives and make it easier to notice when a change in law or personal circumstances requires further work.

Decide what fairness means for your household

Family intentions are not always captured by equal percentages. One child may work in the business, another may need additional support, and a surviving partner may require the home for life. Explain the objective to the legal adviser before focusing on tax efficiency.

Consider what would happen if an asset changed value or a beneficiary died before you. A plan that appears balanced using today's figures can produce a different result later. Record the intended outcome and ask which documents or ownership arrangements are needed to support it.

Avoid promising relatives that a particular sum will be available before the estate calculation is understood. Debts, administration costs and tax may reduce what can be distributed. Clear communication about intentions, alongside properly drafted instructions, can reduce misunderstandings without disclosing every detail of your finances. Review sensitive decisions when circumstances change rather than assuming the original family discussion remains sufficient.