Estate planning is often filed under “one day” tasks, yet the Treasury is already collecting record sums from people who put it off. Inheritance tax (IHT) receipts reached £7.5 billion in 2024/25 and the frozen nil‑rate band ensures that figure will keep climbing. Add house price growth, rising share portfolios and the fact that many family companies now sit on significant retained profits, and you have a perfect storm: more ordinary families dragged into a 40 % tax charge every year.
At the same time, the average age at which people receive an inheritance is 55. By then mortgages, school fees and business start‑ups have long since needed funding. Effective estate planning shifts that wealth transfer forward, keeps HMRC’s share to a minimum and supports the next generation when help matters most.
Whether you own a growth‑stage start‑up, an established family firm or a portfolio of buy‑to‑lets, planning early gives you choice: who benefits, when they benefit and how much tax the family pays. In this blog we walk through the 2025/26 allowances, show how gifts and trusts work in practice, and explain why a robust will ties everything together. Our goal is simple – to help you pass on more of what you have built.
Current thresholds and rates
The nil‑rate band remains £325,000, with an additional residence nil‑rate band (RNRB) of £175,000 where a main home is left to direct descendants. Both bands are fixed until at least April 2028, so fiscal drag will continue to pull rising house prices into charge. Anything above the available bands is taxed at 40%, or 36% if at least 10% of the net estate goes to charity. Married couples and civil partners can combine unused allowances, giving a potential £1 million shelter for a family home.
Gifting while you are alive
Gifts you survive by seven years fall outside the estate. But you do not always have to wait that long. Each individual can give away up to £3,000 a year (the annual exemption), plus unlimited £250 small gifts to separate recipients. Parents may give a further £5,000 to children on marriage or civil partnership. Regular gifts from surplus income are immediately exempt, provided you can show they do not reduce your standard of living – we often help clients document this through annual cashflow schedules. Keeping that evidence can prevent HMRC from challenging the exemption later. Remember that paying school fees or covering a grandchild’s rent counts as a potentially exempt transfer unless it meets the surplus‑income test.
Using trusts to retain some control
For larger transfers, trusts remain a flexible tool. A discretionary trust lets you move up to the nil‑rate band (£325,000) every seven years without an immediate IHT charge. For higher sums, a 20% entry charge applies on the excess. Trust income tax rates are higher than personal rates, so modelling the mix of growth and income is vital. Bare trusts are simpler: the assets belong to the beneficiary outright for tax purposes, so future growth escapes IHT, but the child gains full control at 18. We guide families through the decision matrix, register the trust on HMRC’s Trust Registration Service and prepare yearly accounts so trustees can focus on investment strategy rather than paperwork.
Pensions and life cover
Your pension sits outside your estate and can be passed to any beneficiary with no IHT. Where death occurs before age 75, the lump sum or draw‑down is also free of income tax. After 75, the recipient pays tax at their marginal rate when they draw funds. Completing and updating an expression‑of‑wish form keeps the benefit outside probate. A protection policy written in trust can serve the same purpose – the proceeds cover any residual IHT without swelling the estate.
The importance of a valid will
Dying intestate removes your choice and can trigger unnecessary tax. A professionally drafted will allows gifts to charity or a surviving spouse that maximise allowances. It also coordinates with any trust deeds. Remember to review your will after marriage, divorce or significant asset changes. We offer a collaboration service with local solicitors to ensure the tax and legal sides align.
Cashflow modelling and lifetime planning
According to the Office for National Statistics, the median age at which people inherit is 55. Passing wealth sooner can help younger generations with housing deposits or business investment when they need it most. Our cashflow software projects your future income, spending and investment growth so you can see how much you can afford to gift now without compromising your own retirement lifestyle. Seeing the projection in black and white often turns a plan into concrete action.
Business relief and family companies
Shares in qualifying trading companies can attract 100% business relief once held for two years, removing them from IHT. For family‑owned firms this is a powerful shelter, but only if the business truly trades – surplus investment assets can taint the relief. We review balance sheets annually and ring‑fence excess cash through dividends or de‑mergers to keep the trading status. Where relief applies, holding the shares rather than cashing out can be the better outcome for heirs.
Common pitfalls we see
- Giving away the family home but continuing to live there rent‑free – this is a gift with reservation and the property stays in the estate.
- Forgetting to use the £3,000 annual exemption each tax year.
- Not documenting regular surplus‑income gifts.
- Letting the RNRB lapse because the property was downsized – a downsizing addition can restore it if claimed within two years of death.
- Allowing life‑insurance policies to pay into the estate instead of a trust.
How we support your estate planning
Estate planning is not one set of documents. It is a living process that spans financial forecasts, tax returns, trust registrations and family meetings. We integrate these tasks with your existing accounts and tax compliance, so you have a single point of contact. Clients value the continuity – we already understand the business, so estate planning is joined up rather than bolted on. <a href=”https://www.alton.co.uk/”>Learn more about our estate‑planning service</a>.
Estate planning timeline for different life stages
- 30s – build pension pots and start a will.
- 40s – consider gifts from income and life cover in trust.
- 50s – use cashflow projections to decide whether to transfer assets or invest in a trading company.
- 60s and beyond – maintain accurate gift records, review trust and pension nominations, and prepare the executors with up‑to‑date documents.
More than £100 billion is expected to pass between generations each year by 2025. Effective estate planning turns that transfer into an opportunity rather than a tax leakage.
Helping you minimise IHT
Delay is the enemy of good estate planning. Freeze‑framed allowances and rising asset values mean that every year of inaction moves a larger slice of family wealth into HMRC’s reach. Fortunately, the tools to push back are all available today: nil‑rate bands, seven‑year gifts, life cover written in trust, pension wrappers and – for business owners – 100 % business relief.
Our role is to fit those tools around your life goals. We start with hard numbers – current balance sheets, expected income and projected spending – then translate them into a practical gifting and investment timetable. The result is a plan that protects your lifestyle while moving surplus wealth to the people and causes you choose.
Grasp the opportunity now. Book an estate‑planning review with us and let’s make a tax‑efficient legacy part of your growth strategy. Contact our team today.