Estate planning is about much more than deciding who inherits your assets. A well-structured estate plan could help reduce a potential Inheritance Tax (IHT) bill, protect your family’s financial future, and ensure your wealth is passed on in the most tax-efficient way possible.
Yet many families delay estate planning, believing it’s something that can wait until later in life. Unfortunately, postponing important decisions could prove costly.
According to a report covered by Today’s Wills and Probate (5 June 2026), delays in estate planning could cost UK families £12.3 billion when changes mean pensions will form part of your estate next year.
With significant changes to IHT rules on the horizon, now could be the right time to review your estate planning strategy.
Pension changes make estate planning more important than ever
Under current legislation, most pension wealth sits outside your estate for Inheritance Tax purposes. This has made pensions one of the most effective ways to pass wealth to future generations.
However, from 6 April 2027, this is expected to change. Most pensions will be included when calculating the value of your estate for IHT purposes, potentially increasing the tax liability many families face.
While these pension changes are significant, they aren’t the only reason to start planning sooner rather than later.
The Today’s Wills and Probate report estimates that £7.9 billion of the projected additional tax burden is simply the result of people delaying estate planning.
In fact, someone who begins estate planning at age 50 and takes advantage of available exemptions, reliefs, and appropriate planning opportunities could, on average, pass on £397,000 more to their loved ones
Under the current rules, most pension wealth sits outside your estate for IHT purposes. This made pensions a useful way to pass on wealth. However, for many pension holders, that will change on 6 April 2027, as most pensions will be included in IHT calculations.
However, the new pension rules don’t account for all potential IHT savings. Indeed, £7.9 billion of the total sum is attributed to delaying estate planning.
The report states that a person beginning estate planning at 50 and making use of multiple strategies, such as exemptions, reliefs, and business relief investments, could, on average, pass on £397,000 more to loved ones than those who delayed estate planning until they were 70.
The earlier you begin estate planning, the more options are typically available to help preserve your wealth.
Could your estate be liable for Inheritance Tax?
Many people assume their estate won’t be large enough to pay Inheritance Tax. However, rising property values, investments, savings and upcoming pension changes mean more families could find themselves exceeding the available thresholds.
According to an article in MoneyAge (16 June 2026), a study of homeowners aged 45 and over found that 1 in 5 people with estates worth more than £1 million describe themselves as “just getting by”.
This highlights how easy it can be to underestimate the value of your estate.
Current Inheritance Tax allowances
For the 2026/27 tax year:
- The standard nil-rate band is £325,000
- If you leave your main residence to a direct descendant, you may also benefit from the residence nil-rate band of £175,000
- Married couples and civil partners can usually transfer unused allowances to one another, meaning many families can pass up on £1 million before Inheritance Tax becomes payable
However, your estate includes much more than your home. It can also include:
- Property
- Savings
- Investments
- Valuable possessions
- Business interests
- Most pensions from 6 April 2027
As a result, many people are surprised to discover their estate could exceed the available thresholds.
Estate planning is about more than reducing tax
Although reducing Inheritance Tax is often a key objective, estate planning offers many wider benefits.
A comprehensive estate plan can help you:
- Ensure your assets pass to your chosen beneficiaries
- Make your wishes clear and reduce uncertainty for your family
- Protect your wealth for future generations
- Plan for your own financial security during later life
- Take advantage of available tax allowances and exemptions
Rather than focusing solely on tax, estate planning is about giving you confidence that your finances are structured in a way that reflects your long-term goals.
Four gifting allowances that could reduce Inheritance Tax
One of the most effective estate planning strategies is making gifts during your lifetime.
However, gifting should always form part of a wider financial plan to ensure it doesn’t compromise your own financial security.
It’s also important to remember that not every gift immediately falls outside your estate for Inheritance Tax purposes.
Fortunately, several valuable exemptions may allow you to pass on wealth tax-efficiently.
1. Annual gifting exemption
You can give away up to £3,000 each tax year without the gift being added back into your estate for Inheritance Tax purposes.
The allowance can be:
- Given to one person or split between multiple beneficiaries
- Carried forward for one tax year if unused
2. Small gifts allowance
You may give gifts worth up to £250 to as many individuals as you wish each tax year, provided you haven’t used another gifting exemption for the same person.
This can be a simple way to gradually reduce the value of your estate
3. Wedding and civil partnership gifts
Special occasions also provide valuable estate planning opportunities.
You can give:
- £5,000 to your child
- £2,500 to a grandchild or great-grandchild
- £1,000 to anyone else
These gifts are immediately exempt from Inheritance Tax when the relevant conditions are met.
4. Regular gifts from surplus income
One of the most overlooked estate planning opportunities is making regular gifts from your income.
These payments may fall outside your estate provided:
- There is an established pattern of giving
- The gifts are made from your regular income rather than capital
- You can maintain your normal standard of living after making the payments
This exemption could allow you to:
- Help your child with rent or mortgage payments
- Contribute regularly to a grandchild’s savings
- Support family members with everyday living expenses
Because HMRC will expect evidence that these payments are regular, it’s essential to keep clear records of each gift.
Start your estate planning sooner rather than later
Estate planning is rarely something people regret doing early. In contrast, delaying important decisions can limit your options and potentially leave your loved ones facing a larger Inheritance Tax bill than necessary.
By reviewing your estate planning now, you may be able to take advantage of available exemptions, make informed gifting decisions, and adapt to the forthcoming pension rule changes before they take effect.
Contact us
If you’d like to understand whether your estate could be liable for Inheritance Tax, or you’d like personalised guidance on your estate planning options, please get in touch.
Our experienced financial planners can review your circumstances and help you create an estate planning strategy designed to protect your wealth and provide greater peace of mind for you and your family.
Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
The Financial Conduct Authority does not regulate estate planning or Inheritance Tax planning.
Remember that taper relief only applies to gifts in excess of the nil-rate band. It follows that, if no tax is payable on the transfer because it does not exceed the nil-rate band (after cumulation), there can be no relief.
Taper relief does not reduce the value transferred; it reduces the tax payable as a consequence of that transfer.
Recent Comments