Inheritance Tax – a growing issue

Inheritance Tax – a growing issue

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Published: 06 Jun 2017 Updated: 13 Jun 2022

Rising house prices mean Inheritance Tax is becoming an issue for more and more people. There are several allowances and exemptions for leaving an inheritance, but the rules over who qualifies can be complex. However, with proper estate planning and expert financial advice you can avoid paying more Inheritance Tax than is necessary.

How much is the Inheritance Tax?

Inheritance Tax is a tax charged on your estate after you die. It is usually paid at a rate of 40%, dropping to 36% if you donate at least 10% of your assets to charity when you die. Everyone has a £325,000 allowance called the nil rate band – you don't need to pay Inheritance Tax on anything below this threshold.

The nil rate band is dwindling

The Government announced in 2015 that the nil rate band will be frozen at £325,000 until at least April 2021. With inflation currently at 2.7%*, this means that the real value of the allowance is decreasing – and more people could be on course to leave behind an Inheritance Tax bill in future.

Will you qualify for the residence nil rate band?

In April 2017 the Government introduced the residence nil rate band – a new allowance for passing on the family home. The allowance is currently £100,000 per person and will increase gradually over the next three years until it reaches £175,000 in the 2020/21 tax year.

This is great news for those looking to pass on the family home, but the rules aren’t that simple. The home can only be passed on to children and grandchildren, not nephews or nieces. You can use certain trusts to pass on the home, but importantly discretionary trusts do not qualify. These are a feature of many people’s Wills, so you may need to review yours if you want to use the new allowance.

Planning for Inheritance Tax

Many people choose to get advice from a financial planner on managing or mitigating an Inheritance Tax bill. A financial planner can help you with:

  • Calculating and reducing your potential Inheritance Tax bill
  • Working out how much money you could afford to give away
  • Setting up trusts to keep control over how your money is spent and who it goes to
  • Reviewing your Will to ensure you qualify for the residence nil rate band

To speak to an expert about Inheritance Tax and estate planning, book a no-obligation initial consultation with a Tilney financial planner. Simply complete this short form, call us on 020 7189 2400 or email


This article was previously published on Tilney prior to the launch of Evelyn Partners.