Inheritance tax: a cloud with a silver lining?

Inheritance tax needn’t be a game of snakes and ladders. Julia Rosenbloom, Partner, Private Client Tax Services at Smith & Williamson explores how to navigate the pitfalls.

Gifting Your Wealth
Julia Rosenbloom
Published: 18 Dec 2017 Updated: 04 Aug 2022

Inheritance tax needn’t be a game of snakes and ladders. Julia Rosenbloom, Partner, Private Client Tax Services at Smith & Williamson explores how to navigate the pitfalls.

Inheritance tax has been a fact of life in the UK since the 18th century1. In his 1726 book The Political History of the Devil, the English writer Daniel Defoe noted that “things as certain as death and taxes, can be more firmly believed.” Today some are calling for the tax to be abolished – a topic that Julia Rosenbloom, partner, private client tax services at Smith & Williamson discussed in a BBC television interview.

Given that the UK government has no immediate plans to scrap inheritance tax, the issue is unlikely to disappear any time soon. Julia advises high earners to find out their inheritance tax liability sooner rather than later, and to take steps to ensure that they claim the relevant property relief and business relief. There are significant reliefs available – including business and agricultural reliefs. Without the protection these reliefs provide, families can find themselves under pressure to sell off assets such as property or land to raise the necessary cash. This can be a particular challenge for families that are property or land-rich but cash-poor.

“It’s not too bad if you get these things right, but if you get it wrong, then it is like landing on a snake in the game of snakes and ladders,” said Julia.

While reliefs are available, the other factor is to consider the whole picture of tax liabilities. For example, deciding to invest cash from a business into equities or property could scupper your eligibility for tax relief. But there is a solution: by seeking professional advice, it is possible to separate the business structure from the investments, allowing the reliefs to come back into play.

Beside the reliefs, there is also the main residence nil-rate band introduced with effect from April 2017 as a “supplement” to the standard nil rate band (currently £325,000). The main residence nil rate band is being phased in over a period of time but, by April 2020, up to £175,000 additional nil rate band per person could be available. Consequently, for married couples and civil partners, this brings the potential total amount of nil rate band to £1 million. Whilst the introduction of the additional main residence nil rate band is clearly a welcome and valuable change for some, the rules surrounding it are complex and, in fact, not everyone will qualify for it. Individuals should take advice to ensure they maximise their chances of obtaining this relief.

“Structuring your business correctly is important,” said Julia. “Make sure you use the reliefs that are available to you – they are valuable. People sometimes end up paying a lot more than they needed to. If you are not sure, seek advice!”

1Strictly speaking, inheritance tax was first introduced in the UK in 1796

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.


This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.