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Published: February 2026 | by Admin
Inheritance Tax is one of those topics many people prefer not to think about. It can feel uncomfortable, complicated, or something to deal with “later”. But with property values rising and family finances becoming more complex, Inheritance Tax is now affecting far more people than it used to.
The good news is this. With a bit of forward planning and the right advice, you can reduce the impact of Inheritance Tax and make sure more of your hard-earned wealth goes to the people you care about.
Inheritance Tax is a tax charged on someone’s estate when they pass away. Your estate includes everything you own, such as your home, savings, investments, and personal possessions.
In the UK, Inheritance Tax is usually charged at 40 per cent on the value of the estate above the tax-free threshold. It is paid by the estate itself, not by your family directly, but it can still significantly reduce what they eventually receive.
Every individual currently has a £325,000 tax-free allowance, known as the nil-rate band. If the total value of your estate is below this amount, there is usually no Inheritance Tax to pay.
If you own a home and leave it to your children or grandchildren, you may also qualify for the residence nil-rate band, which can add up to £175,000 to your allowance. This means an individual could potentially pass on up to £500,000 tax-free.
For married couples or civil partners, unused allowances can be passed on, allowing up to £1 million to be inherited without Inheritance Tax in some cases.
Inheritance Tax is paid by the estate before anything is passed on. The executor or administrator is responsible for dealing with this, and payment is usually due within six months.
If there is not enough cash available, families may be forced to sell assets, including property, to cover the bill. This is often where stress and difficult decisions arise, especially when planning has been left too late
Most assets are included when calculating Inheritance Tax. This typically includes:
• Your home or other property
• Savings and bank accounts
• ISAs and investments
• Shares and business interests
• Valuables such as cars, jewellery, and collectables
If planned correctly byou can make some your assets not part of your estate, which can make a big difference.
You are allowed to give away £3,000 each year without it counting towards Inheritance Tax. Small gifts and wedding gifts also have their own allowances.
Larger gifts can also be tax-free if you live for seven years after making them. This rule often surprises people, but it highlights why starting early is so important.
Trusts are not just for the wealthy. In the right situation, they can help protect assets, control how wealth is passed on, and reduce tax exposure. They do need careful planning, so professional advice is essential.
Property is often the biggest part of an estate. Reviewing ownership, considering future downsizing, or planning how property is passed on can all help reduce potential tax bills.
Pensions are usually outside your estate for Inheritance Tax purposes. With the right nominations in place, they can be one of the most tax-efficient ways to pass on wealth.
Having an up-to-date will is one of the simplest and most important steps you can take. Without one, your estate will be divided according to intestacy rules, which may not reflect your wishes or your tax planning intentions.
A will should be reviewed regularly, especially after major life changes such as marriage, divorce, or buying property.
Inheritance Tax planning works best when it is done gradually and thoughtfully. Starting early gives you more choices, more flexibility, and far less pressure for your family later on.
It is not about avoiding tax unfairly. It is about being sensible, informed, and prepared.
Inheritance Tax does not have to be overwhelming. With clear guidance and early planning, it becomes far easier to manage. Most importantly, it helps ensure your wealth is passed on in a way that supports your family and reflects your wishes.
At Galaxy of Homes, we help investors make informed decisions about property, long-term wealth, and financial planning. Speak with our team to explore strategies that protect and grow your assets for the next generation.