Securing more of your wealth for the benefit of your loved ones means carefully planning what happens after your death to make their lives easier and to give you peace of mind

Without the right financial arrangements your family could find themselves having to pay substantial inheritance tax in the event of your premature death. Passing assets tax efficiently to the next generation is a primary objective for those who have spent a lifetime accumulating wealth and our NextGen Intergenerational Wealth Management Service is here to help you.

What will your legacy look like?

It may not be pleasant to contemplate your death or what happens afterwards but the careful planning of your financial and tax affairs means that your loved ones are free to carry out your wishes and be protected from the burden of Inheritance Tax

Are any financial assets exempt from Inheritance Tax?

The rate of tax on death is 40% and on financial transfers while you’re alive it’s 20% where applicable. However, the first £325,000 is exempt from tax. This is known as the Nil Rate Band which has been frozen at £325,000 since 2009 and will continue until 5 April 2026. An additional Nil Rate band has been introduced for death occurring on or after 6 April 2017 where an interest in a qualifying residence
passes to direct descendants. The amount of this relief, phased in over 4 years, is set at £175,000 For many married couples and registered civil partnerships, each spouse or partner enjoys the principal nil rate band and can benefit potentially from the additional residence nil rate meaning that overall tax relief could double to £1,000,000 where applicable (£325,000 + £325,000 + £175,000 + £175,000)

Does giving during my lifetime reduce the tax liability?

HM Revenue & Customs also allows you to make a number of small gifts each year during your lifetime that are exempt from Inheritance Tax. Every individual has a separate allowance which is doubled if both

spouses or both registered civil partners use theirs You may also make larger gifts known as Potentially Exempt Transfers (PETs) providing these are made not less than 7 years before your death. Any other gifts you make during your lifetime that do not qualify
as PETs and known as Chargeable Lifetime Transfers (CLTs) will be liable to Inheritance Tax. One example is a gift made into a discretionary trust

Which exempt financial transfers are allowed by HMRC?

HMRC will allow the following transfers exempt from Inheritance Tax -

  • Up to £3000 each year as either a single gift or a number of gifts (if you don’t use the full allowance in one year you can carry over the remainder to the next)
  • Gifts of up to £250 to any number of people
  • Any amount from income given regularly, known as Normal Expenditure Out of Income (provided it does not reduce your standard of living)
  • £5000 to your child if they are getting married
  • £2500 to a grandchild or distant descendant if they are getting married
  • £1000 to a friend or anyone else you know
  • Donations to charities, political parties and universities (plus certain other bodies recognised and approved by HMRC)
  • Maintenance payments to spouses, ex spouses, elderly or infirm dependant relatives
  • Maintenance payments to children under 18 or in full time education

There are certain other gifts that can qualify for relief from Inheritance Tax -

  • Gifts from a small business, sole trader or partnership enterprise
  • Shares in companies listed on the smaller, riskier stock exchange or the Alternative Investment Market (AIM)
  • Farmers may enjoy up to 100% tax relief when making gifts of particular agricultural land or farm buildings


Members of the armed forces killed in action or whose death is hastened by injuries sustained on active duty are exempt from Inheritance Tax

Will life insurance help pay Inheritance Tax?

If you don’t want to gift your assets while you’re alive you can take out life cover which can pay out on death an amount equal to your Inheritance Tax liability. Taking out a life insurance policy, written under an appropriate trust, could be used towards paying any eventual Inheritance Tax liability

Help & Information

To discuss how our NextGen Intergenerational Wealth Planning Service could help you pass your assets more efficiently to the next generation, please contact us on 020 8396 0486 or email us at cds@eandgfs.com.

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