Inheritance Tax Planning

Inheritance Tax planning might sound grand, but it simply relates to managing the wealth you’ve built up over your lifetime and considering how you’d like it to be distributed when you’re gone.

Inheritance Tax- what is it?

Inheritance tax (IHT) is a major part of estate planning. It is a 40% tax payable on the value of your estate that exceeds certain thresholds known as the nil rate band (NRB).

What’s included in an estate?

Your estate is everything that you own of value; this includes your home. Almost a quarter of people in a recent survey did not know their home was included in calculating an estate’s liability to IHT.

Any other items of value such as cars, jewellery, art and investments are also included in calculating an estate’s liability to IHT.


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What are the thresholds?


Up to £325,000 is free from Inheritance tax. Anything over that will be liable to IHT at 40%.

Jointly (married or civil partnership)

Up to £650,000 is free from IHT by combining individual thresholds, anything over that means tax is charged at 40%. This is not an automatic transfer after the death of the first spouse, it must be applied for.

Residential nil rate band (RNRB)

2017/18 tax year, there is now an extra £100,000 per person i.e. £200,000 per couple. This will increase by £25,000 per year until 2020. By the 2020/21 tax year it will mean a married couple with children could, subject to certain conditions, have a total IHT nil rate band of £1m. These conditions can be complicated, so it is important to seek professional financial advice.

It will never happen to me..

Many think IHT will never apply to them, yet in 2015/2016 tax year HM Revenue & Customs collected nearly £4.7bn from thousands of families. This tax take was a sizable 22% up on the previous year.

(Source: HM Revenue & Customs, Inheritance Tax Statistics, July 2016)

In fact according to a recent survey three fifths of people, aged 45+,with a potential IHT bill were unaware their estate could be liable for the 40% tax.

(Source: Canada Life IHT Survey, October 2016)

The increase in house prices is one reason why more families are paying this tax. In the last 15 years, house prices in the North East have more than doubled.

(Source: Land Registry; UK House Price Index March 2017)

Things to Consider

By taking the right action and making sure it is managed correctly you could reduce the value of your estate, and in turn, any possible future inheritance tax bill along with making provisions to pay an IHT bill.


Gifting some of your wealth away can, if managed correctly, and you survive long enough, help reduce the value of your estate.

It can be complicated...

The rules surrounding gifting are extensive; the best thing to do is to speak to a Financial Adviser about Exempt Gifts, Potentially Exempt Transfers (PET) and Chargeable Lifetime Transfers (CLT) to find out what would be suitable for your situation.


If you want to ensure your loved ones receive a payout as soon as possible, combined with sensible IHT planning, then you may need to consider Trusts. Moving part of your wealth into some form of trust can help to mitigate exposure to IHT.

Trusts should be an essential part of your estate planning. But, depending on your needs these can be complex, you may need legal advice too. Trusts are not regulated by the FCA.

Life protection

Taking out a life insurance policy to pay some or all of an Inheritance Tax bill, can make things easier when it comes to sorting out your estate.

It can help protect your home from having to be sold to pay the Inheritance Tax.

You can reduce Inheritance Tax on your estate if your life insurance policy is written in trust during your lifetime. Make sure you speak to a Financial Adviser as this may not be appropriate in all instances.


Irrespective of Inheritance Tax Planning, everyone should have an up-to-date Will. Remarkably 59% of all adults don’t have a Will.

If a person dies without a will in place their spouse or civil partner could eventually receive most of the estate, but not all of it. Apart from your loved ones not benefitting the way you wanted them to from your estate, the whole process will be slowed down without a Will.

If you are divorced you’ll need to consider the effect this will have on who is named as executors and beneficiaries in your Will. This can become complicated, so it is important to seek professional advice.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

*Will writing is not part of the Openwork offering and is offered in our own right. Openwork Limited accept no responsibility for this aspect of our business. Will writing is not regulated by the Financial Conduct Authority.

Newcastle Building Society introduces to Newcastle Financial Advisers Limited for investments, pensions, inheritance tax planning, financial advice and life cover. Newcastle Financial Advisers Limited is an appointed representative of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.