For a long time, Inheritance Tax (IHT) was considered a tax that only affected the ultra-wealthy. Today, that is no longer the case.
With property prices in the Cheshire “Golden Triangle” remaining robust, and the government strictly freezing the tax-free thresholds, more ordinary, hardworking families are finding their estates caught in the 40% IHT net.
Which is why at Moneytree Wealth Management, we believe that you should have the power to decide where your life’s work goes (and preferably not to the taxman!). However, mitigating a potential IHT bill requires foresight, a clear strategy, and the guidance of an experienced wealth manager.
Hence, here’s our simple guide to understanding your allowances and passing on your wealth efficiently.
1. Understanding the Frozen Thresholds
The foundation of IHT planning is knowing your allowances.
Firstly, keep in mind that the standard nil-rate band (NRB) allows you to pass on £325,000 completely tax-free. And if you’re passing your main residence to your children or grandchildren, you may also qualify for the residence nil-rate band (RNRB) of £175,000.
Crucially, the government has frozen these thresholds until 2030. With asset values naturally rising over time, the gap between your estate’s value and these frozen allowances is only going to widen.
*Important: Estate Planning, Tax Planning, Trusts and Will Writing are not regulated by the Financial Conduct Authority. Tax treatment varies according to individual circumstances and is subject to change.
Tom Lenton, our Managing Partner & Director at Moneytree, says:
“Because spouses can combine their unused allowances, a married couple can potentially pass on up to £1 million tax-free. However, for estates valued over £2 million, that valuable residence allowance begins to taper away. As your financial adviser, the first thing I do is calculate your exact exposure today, so we can stop the tax bill from growing tomorrow.”
2. The Art of Strategic Gifting
One of the most effective ways to reduce your IHT liability is to give your wealth away while you’re still alive to enjoy seeing the benefits it brings to your family.
Every individual has an annual gifting exemption of £3,000, which falls immediately outside of their estate. Furthermore, you can make unlimited small gifts of up to £250 to different individuals (birthday or Christmas gifts are also exempt from IHT!).
Rest assured that gifting doesn’t have to mean handing over your life savings.
At Moneytree Wealth Management, we often utilise the ‘gifts out of normal expenditure’ rule for our high-net-worth clients. So if you have surplus income that you don’t need to maintain your standard of living, a highly powerful, yet underused, strategy is to gift it regularly. Perhaps into a child or grandchild’s Junior ISA or a trust, as this is immediately exempt from IHT.
*Important: Estate Planning, Tax Planning, Trusts and Will Writing are not regulated by the Financial Conduct Authority. Tax treatment varies according to individual circumstances and is subject to change.
3. The Pension Paradigm Shift
Historically, pensions were heavily utilised as an IHT planning tool because they typically fell outside of your taxable estate. However, a monumental shift is on the horizon:
From the Autumn Budget 2024, the policy states that from April 2027, unused pension funds and death benefits will be brought into your estate for IHT purposes.
*Important: The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.
Mark Fletcher, our Director & Financial Adviser, comments:
“This legislative change completely upends traditional retirement planning. The old logic was to spend your ISAs and cash first, leaving your pension untouched for your heirs. Now, we must rethink the order in which our clients deplete their assets. It reinforces exactly why you need an active wealth manager, as a plan made five years ago may no longer be fit for purpose.”
So, What Should You Do Now?
Protecting your family’s bloodline wealth takes time, and the rules are becoming increasingly complex. So here are the next immediate steps to take:
- Value your estate: Do you know roughly what your property, investments, and (soon) your pensions are worth combined?
- Start a gifting strategy: Even small, regular gifts can drastically reduce your future tax burden.
Unsure if you’re on the right track and concerned about how much of your estate will end up with the Treasury?
Well, let’s sit down for an initial, no-obligation chat. Get in touch with our experts today at 01244 470 107 or info@moneytreewm.co.uk.
Approver Quilter Financial Services Limited, March 2026