planning your finances

IHT Planning: What You Need to Know



Posted on: 13th July 2023

If you are finally escaping the deep financial hole of the early 2020s, you will no doubt be adding a lot more focus on planning your finances – Not just for the monthly, but also for the long-term plans for you and your family.

When planning finances, inheritance tax (IHT) will factor in at some point. It is best to know long in advance how that will affect your family and estate once you pass.

Thanks to independent financial advisers Manchester, we can look at the basics of what you need to know and then make an appointment to talk with us to discover more.


Inheritance tax is due when your estate values over £325,000 and not passed onto your spouse or a charity. The current rate of inheritance tax is 40% above £325,000.

IHT will be paid by the executor of your estate. However, there are ways and means to reduce those inheritance tax bills if you work with independent financial advisers Cheshire well ahead of any timeframe where your health may take an ill turn.


One way we would advise to avoid inheritance tax is to leave the estate to your spouse. If you do leave it to a spouse in your will, inheritance tax will not be due even if it exceeds the £325,000 threshold.

You can also benefit from an additional allowance that lets you leave your home to your family tax-free. If you pass your house onto a child or grandchild, there is a nil-rate band of £175,000 on top of the standard IHT allowance of £325,000. Children and grandchildren qualify as long as they are direct descendants.

As a result, you can leave as much as £500,000 tax-free or £1m as a couple. You can also gift family and friends up to £3,000 each year during your life, and it will not count towards IHT.

Taking Steps

Another way of lessening the IHT burden is to put money into certain trusts, charities and insurance. A trust can protect your cash, assets and property by moving them out of your estate so they no longer qualify against IHT.

If you make a gift into a trust rather than to an individual, it avoids being liable for IHT if you pass away within seven years. Any money that you leave to charity is also IHT-exempt. If you leave over 10% of your estate to charity, the IHT payable on the rest of your estate reduces from 40% to 36%.

A life insurance policy will also help your family pay an IHT bill on your estate. However, unless the policy is placed within a trust, it makes your estate larger and increases the IHT bill payable.

These are just some points of consideration regarding your inheritance tax planning. For more information, talk to our specialist team at Haven IFA, your best independent financial advisers UK.