The Importance of Inheritance Tax Planning

The Importance of Inheritance Tax Planning

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If you’ve worked hard all your life to provide for your loved ones after you’re gone, inheritance planning is essential to ensuring your family reaps the full benefit of your estate. Expert inheritance planning advice can ensure the right amount of money reaches the right people at the right time, with the least amount lost due to inheritance tax. In this article, Acumen Financial Partnership explains the importance of inheritance tax planning.

What is inheritance tax?

They say the only certainties in life are death and taxes. Well, in the case of inheritance tax (IHT), both of these eventualities are closely intertwined. When you die, a proportion of your estate – in other words, your money, property and possessions – could be taxed at a rate of 40%. This is applicable to any part of your estate that exceeds the current £325,000 tax-free threshold, which is known as the ‘nil-rate band’.

For instance, if your estate is worth £500,000 the Inheritance Tax bill will be 40% of £175,000. However, there won’t be any inheritance tax to pay if the value of your estate is below the nil-rate band or you leave everything above the threshold to your spouse, civil partner, a charity or a community amateur sports club. If you give away your home to your children or grandchildren your threshold can increase to £500,000.

Any unused threshold may be transferred to a surviving spouse or civil partner. In theory, this means a couple’s combined threshold can be as much as £1 million. However, there are some complex criteria in practice. The person dealing with the estate, known as the ‘executor’ if there’s a will is the person who is responsible for paying any funds from your estate to pay Inheritance Tax to HMRC.

How much is IHT worth to the government?

According to government figures, HM Revenues and Customs collected £5.4 billion in IHT receipts during the tax year 2020 to 2021, which was a 4% increase (£190 million) on the previous tax year. These figures are expected to continue rising following the chancellor’s decision to freeze the nil-rate band until 2026 and with soaring house prices tipping more and more estates over the current £325,000 tax-free threshold.

“IHT receipts have increased as a share of GDP since 2009-10, mainly due to rises in asset prices,” according to the Office for Budget Responsibility. “Residential property makes up the largest share of most estates and average house prices have risen by more than 40 per cent in that period. The rise also reflects significant fiscal drag as the IHT threshold has remained at £325,000 since 2009.” As you can see, IHT is a major source of revenue for the government and will continue to be so for the foreseeable future.

What is inheritance planning?

Inheritance planning or estate planning can help you to ensure your family is cared for once you’ve passed, with your wealth distributed efficiently and with the least amount of tax liabilities. “Estate Planning is often pushed to the bottom of the ‘to-do list’,” says Angela Maher, Managing Director at Acumen Financial Partnership. “But it can provide much-needed peace of mind that loved ones will be financially stable after your death. Most people feel that the biggest beneficiary from their hard work should be their family; all too often the biggest slice goes to the taxman.”

“At Acumen, our financial planners and advisers work closely with you to optimise the estate and inheritance tax (IHT) planning aspects of your will. We can advise on the various tax implications and suggest ways to improve the role of your pension scheme in your estate planning. Not to mention providing inheritance planning tips on everything from trusts to lifetime gifts, life assurance policies and powers of attorney.”

For tailor-made inheritance planning advice, please contact Acumen today by calling 0151 520 4353 or email us at

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