Five ways to reduce inheritance tax

By: Tim Bennett

If you don’t want to leave a big chunk of your wealth to the government, you need to reduce your “death estate”. Tim Bennett looks at how to do it.

Five ways to reduce inheritance tax

Death and tax have been cited as life’s two inevitabilities. Fortunately there are things you can do to mitigate the latter when it comes to your estate.


Inheritance tax (IHT) is the tax your estate will suffer when you die, unless you take steps to reduce it. Here, I take a quick look at our top five.

Spend some money

People who may have saved all their working lives sometimes struggle with this one. However, why not enjoy some of your own wealth, rather than leaving it all to other people? A key part of this is making a plan that factors in your ambitions and goals. Then, get out there and enjoy yourself!

Make outright gifts

You can give away assets to reduce a death estate and therefore the amount of IHT you will pay. However, you need to do so at least seven years before dying if you are not taking advantage of one of the specific exemptions. And be careful – gifts that are deemed to not be made outright can be ignored by HMRC later.

Make gifts into trust

Trusts are a way to protect assets and they can offer a way to mitigate the impact of inheritance tax, albeit this has more to do with the timing of any tax payments rather than the overall amount in some cases.
I cover this area in more detail in other videos, however the next two slides sum up the basics;

Business relief

For investors prepared the take the risk of investing in “qualifying” smaller companies, there are some tax advantages available. Business relief offers up to 100% IHT relief on shares that meet all the criteria, which include the fact they must have been held for at least two years.

Bespoke structures

Lastly, for anyone who has exhausted the other options, or for larger families looking for sophisticated ways to reduce tax, there are company and partnership structures that may be effective. A wealth planner will be happy to explain how these work.

To find out more

If you want to read more about the basics, Svenja Keller’s article in the Summer 2019 issue of Confidant is a good starting point.