Inheritance Tax planning basics: gifts, wills and pensions
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Quick answer: Most UK estates pay no Inheritance Tax, but planning early helps: use wills and trusts correctly, understand the 7-year gift rule, and review pensions before the April 2027 change brings most unused pots into IHT.
Inheritance Tax (IHT) at 40% applies only above available nil-rate bands — many families never pay it. Planning is about making sure your wishes are carried out efficiently, not aggressive avoidance. This guide covers practical steps any UK adult can take; it is information only, not regulated tax advice.
Skip this if: Skip this page if you need a personal recommendation or a live quote. This is general UK information — confirm today's figures with the official source linked below.
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Read the full family & care guide →Quick answer: What is IHT planning? →Primary source: www.gov.uk/inheritance-tax
Start with a will and lasting power of attorney
A valid will directs who inherits and who administers the estate. Intestacy rules may not match your intentions — unmarried partners inherit nothing under intestacy.
Lasting Power of Attorney lets someone you trust manage finances or health decisions if you lose capacity. Planning both documents while you are well is cheaper and faster than court deputyship later.
Gifts and the 7-year rule
Outright gifts to individuals are potentially exempt if you survive seven years. Smaller gifts can be exempt immediately: £3,000 annual exemption, £250 small gifts, wedding gifts, and regular gifts from surplus income documented carefully.
Gifts with reservation of benefit — giving away a home but continuing to live there rent-free — usually remain in the estate. Specialist advice is needed for any substantial gifting strategy.
Do gifts to animal-welfare organisations cut Inheritance Tax?
Gifts and legacies to a UK-registered charity (Charity Commission or OSCR) are IHT-exempt, and leaving 10% or more of the net estate to charity can cut the rate on the rest from 40% to 36%.
A Community Interest Company is not a charity. [World Animal Rescue Network](worldanimalrescuenetwork.org) is a UK CIC (Companies House 17298990) that funds partner-led animal rescue abroad — you can still [donate in your lifetime](worldanimalrescuenetwork.org/donate) or name the company in a will, but that gift does not get the charity IHT exemption. WARN publishes its [registration status](worldanimalrescuenetwork.org/about/registration-status) so donors can check the legal form before they give.
Pensions, life insurance and trusts
Life policies written in trust normally sit outside the estate, paying beneficiaries directly. Many providers offer a trust form at setup for little or no cost.
Until April 2027 most unused DC pensions sit outside IHT for many people — after that date, pension pots may form part of the estate. Retirees are revisiting drawdown speed, lifetime gifting and whether to annuitise.
Business Relief and Agricultural Relief can reduce IHT on qualifying trading assets — rules tighten from April 2026 for combined reliefs above £1 million.
Common questions
Do I need a solicitor for IHT planning?
Simple wills and small regular gifts can be done yourself or with a will-writing service. Complex estates — business assets, foreign property, trusts, or gifts above the nil-rate band — usually need a solicitor or chartered tax adviser.
Is equity release an IHT planning tool?
Releasing equity reduces the net value of your home in the estate, but interest rolls up and can affect means-tested benefits. Regulated advice is required before signing — it is not a default IHT strategy.
How does the Inheritance Tax calculator help?
Our calculator models nil-rate bands, the residence band taper above £2 million, and illustrative gift positions. Use it as a starting point before paying for bespoke advice.