Inheritance Tax Planning
Inheritance Tax Planning Lawyers East Lothian
Inheritance Tax planning ensures your family and the causes you care about get the most from your estate as possible after you die. Our lawyers can provide expert advice on the tax implications of your estate and recommend practical steps you can take to make your estate more tax efficient.
Your loved ones will benefit from you taking the time to consider your IHT position now. Get in touch today for specialist support.
When is IHT Payable?
Inheritance Tax, or IHT as it is commonly known, is payable on everything you have of value when you die, including your home, savings and investments, cars, any other properties or land (even if they are overseas) jewellery, works of art/antiques and general household furniture.
The current IHT threshold is £325,000. The part of your estate above this threshold is charged IHT at a rate of 40%. If the total value of your estate is below £325,000, you will not usually have to pay IHT.
There are some exceptions to the general rules:
- If you leave everything over the threshold to your spouse or civil partner, or to a charity or community sports club, in your Will your estate will not be liable for IHT. However, it is important to be aware that unmarried partners, no matter how long-standing, have no automatic rights under the IHT rules.
- An additional allowance, the
residence nil rate band, of up to £175,000 is available where your home passes
to your children or grandchildren, taking the threshold to £500,000. This
allowance is reduced where the estate is worth more than £2 million.
- If you donate 10% of more of your net estate to charity, the IHT rate
you pay will be reduced from 40% to 36%.
What reliefs are available?
Married couples and civil
partners can usually pass any unused allowances to each other. This means that
on the second death a couple may be able to leave up to £1 million free of
Inheritance Tax, provided the conditions for the residence nil rate band are
met.
This depends on the type of assets included in your estate. For example, if you have business assets, agricultural or woodland property, or heritage assets, these may qualify for IHT relief if they meet certain conditions.
Some gifts may also be exempt from IHT, but this depends on their value and when they were given. Making gifts during your lifetime is an effective way to reduce your tax bill, but it must be planned carefully. Further assets held in certain types of trust may avoid IHT.
The rules that apply here are complex. Our Private Client lawyers will carefully assess every aspect of your estate to work out if any reliefs apply.
What is changing?
The Inheritance Tax thresholds have been frozen for several years and will remain frozen until April 2031. As property values rise, this brings more ordinary estates within the scope of the tax each year.
Two further changes are worth knowing about. Since April 2026, the 100% relief available on qualifying business and agricultural property has been capped at £2.5 million per person, with relief at a lower rate above that figure. From 6 April 2027, most unused pension funds and death benefits will count as part of your estate for Inheritance Tax purposes for the first time. If your estate planning was put in place some years ago, these changes are a good reason to review it. We would be happy to talk it through with you.When does the tax need to be paid?
Your executors or legal personal representatives typically have six months from the end of the month of death to pay any IHT due. The estate cannot pay out to the beneficiaries until this is done.
How can we help with IHT Planning?
With specialist legal advice, it is possible to significantly reduce (and sometimes altogether remove) the IHT payable from your estate. We will diligently consider all your assets and listen carefully to your personal circumstances and preferences. With a keen understanding of your requirements, we will set out our recommendations on how best to mitigate IHT. Whichever route you decide to take, our lawyers will ensure all steps are implemented correctly.
