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Do you need to pay inheritance tax? Your guide to how inheritance tax works & 5 ways you could save

The subject of inheritance tax is a hot topic right now, with current Prime Minister Rishi Sunak considering widespread reforms such as cutting the rate payable, and even scrapping it all together.


But what exactly is inheritance tax, and why is it seen as a bargaining tool to win votes for the next general election?


Essentially, it’s a tax on the estate of someone who’s died, so any property and assets. At present, it’s payable on anything over £325,000 and charged at 40%.


When calculating inheritance tax, any liabilities, exemptions and reliefs are deducted from the value of the estate first, and assets left to a spouse or civil partner are usually exempt, as are assets left to a charity.


While many of us won’t be lucky enough to hit the current inheritance tax threshold in our lifetime, it doesn’t necessarily mean we’ll avoid the issue if we pass our wealth on to our children or grandchildren.


This is the prime reason why conversations around potential inheritance tax reductions always hit the headlines!


The good news is, even without a radical change in government policy you can reduce or lessen the impact of inheritance tax with some clever planning.


That way, more of that money you’ve worked so hard to save is passed to the people you think deserve it most.


Scroll down for 5 things that could potentially lower your liability right now, or get in touch to speak to your local Beewise financial planner. Click here to email us and arrange a call, or ring 01934 204841.

There are lots of ways you can potentially lessen the inheritance tax you might be on course to pay, and your local Beewise financial planner can give tailored advice for your individual circumstances.


But, here’s 5 quick wins for reducing that potential inheritance tax bill:


1. Make sure you have a valid will in place

Writing a will – or making sure your current will is up to date and suits your needs – is one of the most important things you can do.


Not only can it ensure your estate goes to the right people, but not having a valid will could put a huge burden on your loved ones.


Beewise are here to help you fix that though! We want to make sure your family and close friends have all they need to carry out your wishes.


And, with the right will and any necessary trusts in place, you’ll have peace of mind everything goes to those you intended it to.


To find out more, get free advice on your situation, or to make sure your current will is suitable for your needs, email us or call 01934 204 841.


FYI – will writing isn’t part of the Quilter Financial Planning offering and is offered by Beewise in our own right. This just means Quilter Financial Planning don’t accept responsibility for this aspect of our business.


2. Gift some of your wealth now

Many people leave it too late to pass on their wealth – gifting money while you’re still around can be more efficient in relation to inheritance tax.


Plus, passing on some of that inheritance early means you get to see how those gifts transform the lives of your family!


For instance, you could help children, grandchildren, nieces or nephews get on the property ladder by gifting them a money towards a deposit for their first home.


Under current law, anything you give away more than seven years before your death is exempt from inheritance tax. And, you can give away up to £3,000 each year inheritance tax-free.


Small gifts up to £250 are exempt too, as long as they come from your income. You could make larger, regular gifts, but for these to be inheritance tax-free they have to come from income too, and can’t been seen to impact your standard of living.


If you do have a relation looking to buy a house with gifted money, get in touch as our Beewise mortgage advisors can help, from calculating how much they can borrow to getting the most suitable mortgage deal.


For more on the support and advice Beewise offer throughout the mortgage process, click here – we can also help home movers and those looking to remortgage too.


3. Use your pensions wisely with our help

Did you know pensions are one of the most tax-efficient ways to pass on your wealth?


If you were to die before the age of 75, any benefits left in a money purchase pension can be paid as a lump sum or income to any beneficiary, with no tax to pay!


And, if you were to die after the age of 75, they’ll still only be taxed at your beneficiaries’ marginal income tax rate.


Your local Beewise advisor can help you set up a pension, or review your current pension to make sure it suits your needs. It’s important to regularly check in on your retirement plans for lots of reasons, not just inheritance tax liability.


If you’ve changed jobs you could have old workplace pensions which aren’t performing to their potential – something we can sort now for you. Give us a call on 01934 204 841 or email to talk to your local financial planner.


Quick disclaimer! The value of pensions and the income they produce can fall as well as rise, so you may get back less than you invested. And, past performance is not a guide to future performance.


4. Put trusts in place for maximum tax efficiency

By writing trusts into a will, you can help reduce an inheritance tax bill and gain control over how your assets are used by future generations.


Some trust structures let you leave money without it being subject to inheritance tax, however the rules vary, so contact your local Beewise advisor to find out how this could work for you!


We’re on hand to support you with estate planning, making sure your assets are as tax efficient as possible.


5. Review your life insurance with Beewise

As well as providing for your loved ones, life insurance can also pay or reduce a prospective inheritance tax bill.


And if it’s written in trust, the proceeds of your life insurance policy won’t be included in your estate!


Instead it’ll pay out directly to the trust or beneficiary, meaning it falls outside of your estate, so doesn’t incur any inheritance tax liability.


Your local Beewise advisor can review your current policies, making sure they’re still suitable, and recommend the right policies for your needs.


As protection experts, we offer a free comparison service across the UK’s leading providers, saving you time and money.


Take back control of your inheritance tax liability

No one wants to pay more tax than they have to, so putting a plan in place and regularly reviewing it can help make sure you don’t miss out on valuable allowances.


As inheritance tax is a complex subject, we’d always recommend getting expert advice – your Beewise advisor can review your overall financial picture to help reduce tax liabilities and ensure your estate goes to those you want it to.


From investments and pensions to the right will and any necessary trusts, we’re here to give you financial peace of mind.


Contact us today on 01934 204 841 or email to arrange a call with your local financial planner.



Looking for more expert advice? Check out these other helpful blog posts!


Don’t forget we also offer award-winning mortgage advice! Voted Best Mortgage Office in the UK 2022, you’re in safe hands with Beewise FS Ltd - check out our 240+ 5 star Google reviews.

To get in touch with your local Beewise advisor, call 01934 204 841 or email to arrange a call, with evening and weekend appointments available.



Estate planning, trusts, taxation advice and will writing are not regulated by the Financial Conduct Authority. And, tax treatment varies according to individual circumstances and is subject to change.


Inheritance tax planning & trusts are not regulated by the Financial Conduct Authority.


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