10 Ways to Reduce Inheritance Tax on Your Estate

1 and 2. Use every allowance you are entitled to

Start with the nil-rate band, the amount that passes free of inheritance tax, and the residence nil-rate band, an additional allowance available where a qualifying home passes to direct descendants. The residence allowance tapers away once an estate exceeds £2 million, which makes reducing estate value below that threshold unusually valuable.

Unused allowances can generally be transferred between spouses and civil partners, so a surviving spouse's estate may have double the allowances available. Claiming that transfer requires evidence from the first death, so keep the paperwork. Reviewing how your wills are drafted is essential — a poorly worded will can lose the residence allowance completely.

3 and 4. Gift regularly and gift early

Annual exemptions, small gift allowances and wedding gifts are immediately outside your estate and cost nothing to use. The exemption for normal expenditure out of income is more powerful still: regular gifts from genuine surplus income, which do not affect your standard of living, are exempt straight away with no upper limit. Good records are the price of admission.

Larger gifts are potentially exempt transfers and fall out of your estate after seven years. The earlier you start, the more likely the clock runs its course, and any growth in the gifted asset accrues outside your estate from day one. Affordability comes first — never gift capital you may need later.

5 and 6. Trusts and life cover

Trusts let you remove value from your estate while keeping influence over who benefits and when. Different structures serve different purposes: discretionary trusts for flexibility, loan trusts where you want your capital back, discounted gift trusts where you need an income stream. Each has its own tax treatment, and none should be entered into without advice.

Where tax is unavoidable, life assurance written in trust is the cleanest solution. A whole-of-life policy in trust pays out free of inheritance tax and outside probate, giving your executors immediate cash to settle the bill rather than forcing a rushed sale of the family home or business.

7 and 8. Business, agricultural and charitable reliefs

Business relief and agricultural relief can substantially reduce the taxable value of qualifying trading businesses, unquoted shares and farmland. The rules are detailed, the qualifying conditions are strict, and reforms taking effect from April 2026 cap the amount that attracts full relief — so anyone relying on these reliefs should have their position reviewed rather than assumed.

Charitable giving works on two levels. Gifts to registered charities are exempt from inheritance tax, and where you leave a sufficient proportion of your net estate to charity, the rate charged on the rest of the estate is reduced. For the charitably inclined, the net cost of giving can be considerably lower than expected.

9 and 10. Pensions, ownership and structure

Pensions have historically sat outside the estate, and the way they are dealt with is changing from April 2027. Expression of wish forms, drawdown decisions and the order in which you spend different pots all matter more than most people realise. Reviewing nominations regularly costs nothing and is frequently overlooked.

Finally, look at how assets are held. Joint tenancy passes property automatically to the survivor, which is not always what a tax-efficient plan requires. Severing a joint tenancy, equalising assets between spouses, and reviewing who owns what can unlock allowances and open up planning that is otherwise unavailable.

• Review pension death benefit nominations annually
• Check whether property is held as joint tenants or tenants in common
• Equalise assets between spouses where allowances are being wasted
• Keep a written record of all gifts and exemptions claimed
• Revisit the plan after any major life or legislative change

Where to start

The first step is always a calculation: what would your estate actually pay today? Most people either overestimate the problem and worry unnecessarily, or underestimate it because they have not counted property growth, pensions, life policies not in trust, and gifts within the seven-year window.

Once you know the number, the options become concrete rather than theoretical. Our advisers will produce that figure for you, show what each measure would save, and prioritise the changes that deliver the most benefit for the least disruption to your life.

Frequently Asked Questions