Inheritance tax planning is rarely at the top of anyone’s to-do list. For many medical partners, charity CFOs and SME owner-managers, it feels like something for “much wealthier” families. Yet frozen thresholds, higher property values and changing rules mean more ordinary households are drifting into the inheritance tax net each year.
HMRC’s latest inheritance tax liability statistics commentary show that in 2022–23, 4.62% of UK deaths resulted in an inheritance tax (IHT) charge – up from the previous year and back near historic highs. The Office for Budget Responsibility (OBR) expects IHT to raise about £9.1 billion in 2025–26, roughly £320 per UK household (OBR, 2025). In short, the tax is hitting more families and bringing in more revenue.
Autumn Budget 2025 extended the freeze on the standard £325,000 nil-rate band and the £175,000 residence nil-rate band to April 2031, keeping thresholds fixed while asset values rise. From April 2027, most unused pensions will also come into the inheritance tax calculation, potentially affecting thousands more estates. Against that backdrop, sensible inheritance tax planning is no longer a “nice to have” – it is part of routine financial housekeeping for modern families, especially where there are property portfolios, practice shares or cross-border assets.
If you want a deeper technical refresher alongside this piece, you can also read our earlier inheritance tax planning overview.
Key building blocks for inheritance tax planning
Before we talk about structures and tactics, it helps to get the core rules straight. For 2025/26, the position is:
- Standard nil-rate band: Each person has a £325,000 allowance. Above this, IHT is normally 40% on death once reliefs and exemptions are applied.
- Residence nil-rate band: An extra £175,000 per person can apply if you leave a qualifying home to direct descendants (children, stepchildren, grandchildren).
- Married couples and civil partners: Allowances are usually transferable. In practice, many couples can pass up to £1 million free of IHT if they leave their home to direct descendants and the estate is below the £2 million taper threshold.
On top of this, we now have a residence-based regime. For long-term UK residents – broadly, people who have been UK resident for at least ten of the previous twenty tax years – worldwide assets are within scope of IHT. That matters for doctors with overseas property, business owners with shares in non-UK companies or families with assets held in offshore structures.
Business and agricultural property relief (APR/BPR) remains important for practice shares, trading companies and farms. From April 2026, a combined £1 million allowance for 100% relief is being introduced and will be transferable between spouses, with that £1 million limit frozen until 2031 (subject to detailed conditions). If your estate includes a trading company, surgery premises or farmland, forecasting how this interacts with your nil-rate bands is now a key part of inheritance tax planning.
A quick example:
- A married couple own a £700,000 home, £400,000 of pensions, £300,000 of other savings and investments, and shares in a trading company worth £800,000.
- If the business qualifies fully for relief and the home passes to children, between them the couple could use two standard nil-rate bands (£650,000) plus two residence nil-rate bands (£350,000).
- That gives £1 million of general allowances plus protected business value – but pensions and investments may still leave part of the estate exposed, especially after 2027.
Seeing the whole picture on one page is often the starting point for meaningful inheritance tax planning.
Gifting strategies that work for modern families
Gifting is one of the most flexible tools in inheritance tax planning, but it needs structure. Used well, it can move value to younger generations while supporting things that matter – such as deposits for homes, school fees or capital for a family business.
Key points to bear in mind:
- Annual exemption: You can usually give away up to £3,000 per tax year without it being added back into your estate. Couples can combine this – and carry forward one year’s unused allowance – to move meaningful sums over time.
- Small gifts: You can make smaller gifts of up to £250 per person each tax year (provided they do not also benefit from your £3,000 annual exemption).
- Regular gifts from surplus income: If you can show gifts are made from income after your usual living costs, they can be exempt immediately. This is powerful for high-earning medical partners or owner-managers whose income outstrips spending.
- Potentially exempt transfers: Larger one-off gifts are normally outside IHT if you survive seven years. If you die sooner, the gift may be dragged back into the calculation, though taper relief can reduce the tax after year three.
Where families get caught is timing and evidence. HMRC statistics show more estates falling into IHT, and poorly documented lifetime gifts are a common reason (HMRC, 2025). For example, a GP partner who casually lends – and later “forgets” – £100,000 for a child’s house deposit may still see that money treated as part of their estate if the paperwork and records are unclear.
Two practical tips:
- Keep clear records: Note dates, amounts and the nature of each gift. If it is from surplus income, keep supporting cashflow evidence.
- Review affordability: Gifting that undermines your own retirement is rarely good planning. We often model how much you can safely give without compromising long-term security.
Trusts, pensions and property: Where things get tighter
Trusts can play a useful role in inheritance tax planning for modern families – particularly where there are second marriages, vulnerable beneficiaries or concerns about how younger family members will manage large inheritances. Trusts can allow you to ring-fence capital, support children or charities and still retain a degree of control.
However, the new residence-based system and the £1 million APR/BPR cap mean trust and business structures need fresh scrutiny. Long-term UK residents who hold overseas assets or have settled assets into non-UK trusts may find more value within the IHT net than before.
Pensions are another key pressure point. From April 2027, most unspent pensions will be brought into the taxable estate on death rather than sitting entirely outside IHT. HMRC’s guidance on unused pension funds and death benefits estimates that, of around 213,000 estates with inheritable pension wealth in 2027–28, about 10,500 will have an inheritance tax liability where previously they would not and a further 38,500 will pay more tax.
For practice partners and business owners, that creates three overlapping questions:
- How pensions fit the overall plan: Relying on pensions as the “IHT-free pot” is becoming less reliable.
- Whether life cover is needed: Whole-of-life cover written in trust can provide liquidity to meet future IHT, particularly where wealth is tied up in a business or property.
- How property is held: The structure of buy-to-let portfolios, surgery buildings and family homes can all influence both IHT and capital gains tax. Our property specialists can help you review the options as part of joined-up inheritance tax planning.
Blended families, charities and modern structures
Many of the people we work with are in blended or non-traditional family arrangements: second marriages, long-term unmarried partners, adult children from previous relationships or dependants with ongoing care needs. In those cases, inheritance tax planning is as much about fairness and clarity as it is about saving tax.
Issues we often see include:
- A partner in a medical practice leaving everything to a second spouse, unintentionally disinheriting children from an earlier relationship when the spouse later rewrites their will.
- Cohabiting couples assuming they have the same tax treatment as married couples, even though they do not share the same IHT exemptions.
- Charities being left gifts via informal arrangements or trusts that do not meet the technical conditions for IHT relief. Autumn Budget 2025 tightened the rules so that, in many cases, only direct gifts to UK-registered charities or community amateur sports clubs qualify for the exemption.
In these situations, tools such as life interest trusts, letters of wishes and carefully structured charitable legacies can help to balance competing priorities – for example, providing income for a surviving partner while preserving capital for children, or ensuring a favourite charity receives a defined share. The key is to align your inheritance tax planning, wills, lasting powers of attorney and any shareholder agreements, rather than treating them as separate exercises.
Next steps for your inheritance tax planning
Inheritance tax planning is not about beating the system. It is about using the allowances and reliefs that exist, and passing assets on in a way that reflects your values and your family’s needs. With thresholds frozen until 2031, a residence-based regime for long-term residents and pensions coming into scope from 2027, doing nothing now is still a decision – one that may leave your executors with a larger bill and harder choices than necessary.
A practical starting point is to:
- Pull together a clear estate snapshot: Assets, liabilities, pensions, business interests and expected legacies.
- Review your wills and letters of wishes: Check they still reflect your family structure and charitable intentions.
- Stress-test your plan: Model how your estate might look in five to ten years, factoring in property values, pension rules and cashflow needs.
If you would like structured help with that process, our tax services team can review your inheritance tax planning in the round and highlight practical options. That might include a gifting strategy, changes to how property or practice shares are held, or building IHT planning into your wider retirement and succession plans.
Whether you are a GP partner, a charity finance lead or an SME owner-manager, the right inheritance tax planning can make sure more of what you have built reaches the people and causes you care about – with fewer surprises for those left to deal with your estate. Get in touch with us to get started.
