Inheritance Tax Planning Advice – Manage Estates Smartly!

Inheritance Tax Planning Advice – Manage Estates Smartly!

Inheritance Tax or IHT planning is important for everybody living in the UK to save a huge amount on taxes after their death. It is essential to act when you are alive so that your heirs do not have to face financial challenges once you are gone. By taking inheritance tax planning advice from professionals to manage estates smartly, one can easily reduce inheritance tax bills. 

Estate planning is done so that the maximum of your wealth is inherited by your loved ones and the minimum goes to the taxes. If the value of your total money and possessions crosses the threshold limit (also known as nil rate band) of £325,000, your family will be paying an inheritance tax rate of 40%. 

So, it’s important to keep that bill to a minimum! Wondering HOW?

Let’s find the answer to this. But first, here is the basic knowledge to help you understand the process better. 

What is Inheritance Tax and Nil Rate Band?

Inheritance Tax

The Inheritance Tax or IHT is the British Inheritance Tax applied after someone’s death to his/her assets that are worth above £325,000. The tax is charged by calculating the total value of the estate including cash, property, and possessions. 

Nil Rate Band 

Nil Rate Band or NRB is the minimum tax-free threshold limit, which is currently £325,000. If the value of your assets is below the NRB, then there will be no tax deductions. 

What is the Inheritance Tax Rate?

The inheritance tax rate is generally charged at 40% for an estate value of more than £325,000, which is the tax-free threshold limit. If the value of your assets at the time of death is more than this limit, then the will executor or the administrator needs to pay a tax rate of 40%. Inheritance tax is to be paid by your beneficiaries by the end of the sixth month from your death. 

For example, if your estate, including all the possessions, land, and money, is worth £500,000 at the time of death, then the tax charged will be £70,000. 


Your threshold limit is £325,000, so £500,000 – £325,000 = £175,000. The total tax calculated will be on £175,000 and not on the total assets. So, the total tax charged will be £70,000.   

It is advised to take inheritance tax planning advice from an expert financial advisor to reduce or eliminate the tax bills. 

How to Manage Inheritance Tax and Estate Planning? 

Managing inheritance and estate planning can be challenging at times, especially when your family is going through a lot after your death. So, it’s better to take action on time to ensure maximum help goes to your beneficiaries. 

With that said, let’s discuss the ways you can manage inheritance tax and estate planning. 

  • Giving financial gifts

HM Revenue and Customs considers financial gifts as tax-free, but there are certain rules and limitations. It’s important to plan early, so, giving away money as financial gifts can be your best bet to save money and benefit your loved ones.


  • Having a whole-of-life insurance policy

Although the inheritance bill can be paid by your heirs from the cash held or the value of assets calculated after selling assets, an insurance policy is also beneficial to directly pay the tax. 

Life insurance policies give a lump-sum amount on your death, which can be used to pay the bill so that your beneficiaries can live hassle-free. 

  • Passing on Pension Funds

If your pension amount is untouched while you afford to live by other means of income, then your pension funds can be tax-free. And, these will be passed on to your heirs in a zero tax bracket. 

There are many other techniques to eliminate the tax on your assets. 

However, you should ask for inheritance tax planning advice from a professional to reduce the size of your taxable estate

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