Estate Planning: A Guide to Inheritance Tax

Image of a person signing a legal agreement for their estate after planning their finances for inheritance tax.

Estate Planning: A Guide to Inheritance Tax

Inheritance tax can be a confusing and overwhelming aspect of estate planning. Cave & Sons’ financial advisors aim to make your understanding of inheritance tax as straightforward as possible. You can read more on what Inheritance tax (or IHT) is, who is responsible, and certain exemptions that might be relevant to you on our latest blog post here.

What is Inheritance Tax?

Inheritance tax (in the UK) is a tax on the estate of someone who has died. It is money paid to the government after a person has passed away, depending on the total value of their estate.

What is My Estate?

Three of the main considerations for valuing a person’s estate are:

    Money (including cash in bank, shares, investments, life insurance payouts)
    Possessions (jewellery, cars, anything that you own)

Bear in mind, your estate does not include anything that you owe (for example; mortgages, outstanding debts and funeral payments).

You might have some idea of the value of your estate but it is worth reviewing your insurance policies and value frequently, as well as seeking advice on estimating its worth. It is also very important to make a will, to help with estate planning.

How Much Will I Have to Pay?

The current HMRC guidelines for Inheritance tax are as follows.

You will not have to pay Inheritance tax if:

    The total value of your estate is below £325,000
    You leave everything in your estate that is above the £325,000 threshold in your will to your spouse, civil partner, as a charity donation or a contribution. (See our ‘Exemptions and Considerations’ section below for more information).

There are certain situations that could mean you avoid your estate being taxed. However, certain gifts (such as shares and property) given when you are alive could result in its own taxation for the recipient.

Remember, even if you know the estate is below the Inheritance tax threshold, you will still have to report it to the HMRC.

Inheritance Tax Exemptions/Considerations.

Although there are certain exemptions that may be taken into consideration when valuing your estate for inheritance tax, these are recommended to be discussed with both a financial advisor and your family.

Marriage / Civil Partnership

If you are married or in a civil partnership, you may be entitled to leave your estate to your spouse or partner. This would not be taxed at the time, but could be added to your spouse’s total estate on their passing, and would then be subject to tax if above the threshold.

Charity Donations

If you choose to make a payment to a UK based registered charity of your choice after your death, then this money will be given at its full value and will not be subject to inheritance tax. There are some other discussions to be had with a financial advisor, such as the possibility of a reduced rate of inheritance tax if only some of your taxable estate is given to charity.


You can give gifts over the course of your life that may then be exempt from inheritance tax. These gifts should not be taxed if you survive for seven years after they have been given away (known as a ‘potentially exempt transfer’). Gifts can include anything in your estate with value (money, property, possessions) or could be the difference in value when something is transferred for less than it is worth.

You can give away gifts each tax year up to certain values (£3000 with a yearly rollover limit up to £6000) or make multiple small gift donations of £250 each. You can also give wedding and ceremonial gifts (subject to donation limits), help with an individual’s living costs, or give gifts to charities, clubs or political parties.

Inheritance Tax Trust Structures and Estate Planning with Cave & Sons.

At Cave & Sons, we understand that you may not be sure what the best plan should be for your estate. We are on hand to give you the best advice on financial planning for your future and provide you with options that are best for you and your family. We can guide you through the steps of valuing your estate and the probate for assessing what is liable for inheritance tax.

If you would like to get started on your estate planning, or would like to discuss your requirements for any other aspect of your financial planning, please call us on 01604 621 421 or fill in your contact details using our contact form, and we will be in touch as soon as possible.

Cave & Sons Ltd is authorised and regulated by the Financial Conduct Authority (FCA), Financial Services Register number 143715./contact/
This communication is for general information only and is not intended to be individual investment advice, tax or legal advice. The views expressed in this article are those of Cave & Sons and should not be considered as advice or a recommendation to buy, sell or hold a particular investment or product. You are recommended to seek professional regulated advice before taking any action.
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