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Wealth Planning -

Protect your wealth from inheritance tax

Record-breaking inheritance tax (IHT) receipts are rolling into HMRC. But families can reduce the chances of being hit by a hefty inheritance tax bill by taking steps now. In this article, we discuss ways to ensure your beneficiaries will receive a more significant transfer of wealth.

Inheritance tax is a topic that continues to grab headlines. January 2024 data from HMRC revealed that IHT receipts for April to December 2023 reached £5.7bn. This is £400m higher than during the same period in 2022, and indicates that last year’s record-breaking IHT receipts of £7bn are on track to be broken again, continuing the upward trajectory over the last few years.

While this is partly due to frozen IHT thresholds, it also highlights that many families are failing to plan for inheritance tax. In this article, we explain how IHT works, give some context to the recent IHT receipt rises, and offer some ways to protect your estate from inheritance tax.

How inheritance tax works

The nil-rate band, a tax-free inheritance allowance that applies to everyone, usually allows individuals to pass on up to £325,000 of their estate without paying any inheritance tax. Anything exceeding this threshold could be subjected to a 40% tax. The basic nil-rate band has remained unchanged since April 2009, despite inflation eroding its value by 32.8% over that time. Meanwhile, average house prices have jumped by nearly 85%.

While some homeowners may benefit from an additional ‘residence nil-rate band’; of up to £175,000 when passing on their primary residence to a direct descendant, this allowance has been frozen since April 2020. And if you are a married couple with an estate over £2.7m, you will not benefit from this allowance.

Now, a combination of rising house prices, inflation, and unyielding tax freezes has pushed an increasing number of families, who may not consider themselves wealthy, above the threshold for inheritance tax.

Experts are already predicting another record-breaking year for inheritance tax as we move into 2024.

But families can reduce the chances of being hit by a hefty IHT bill by taking steps now.


What to consider if you are concerned about inheritance tax

It is important to ensure you can lead the life you desire, with access to income and capital whenever you need them throughout your lifetime. And for some families, it is also helpful to talk about your ambitions for your wealth and discuss as a family how to achieve these goals.

Your aspirations for your family's wealth require thoughtful consideration and planning and having a tax-efficient plan ensures your beneficiaries will receive a more significant transfer of wealth.

A wealth planner can help you in structuring your assets per your preferences, including who should have access to your wealth and under what circumstances. Having the right team around the table is important and we can also introduce you to legal and tax specialists.


Some ways to approach your estate planning strategy include:  

Lifetime cashflow

Identifying how your assets and income will safeguard your lifestyle is crucial. A wealth planner can offer valuable guidance to help you structure your investments in a way that supports your desired lifestyle and creates a lasting legacy.

But it is also worth remembering that spending and enjoying your wealth is the easiest way to reduce your IHT burden! The less money you have in your estate when you die, the lower the tax bill to be paid by your loved ones.


Lifetime gifting

Gifting can play a significant role in your overall wealth planning strategy. Some gifts can be made each tax year, and immediately fall outside your estate for IHT purposes, provided they qualify and are made outright.

These include an annual gifting allowance of £3,000, gifts of up to £5,000 from a parent on marriage or civil partnership, and regular gifts from excess income. You can also give as many gifts of up to £250 per person as you want each tax year, as long as you have not used another allowance on the same person.

Gifts in excess of these allowances will only be tax-free if you live for seven years after making the gift.



Trusts can be a powerful tool for giving gifts to your chosen beneficiaries. By appointing yourself as a trustee and writing a letter of wishes, you can maintain control or influence over the distribution of income and capital.

Certain trusts offer an excellent way to reduce the amount of taxes loved ones pay when receiving an inheritance. A wealth planner can guide you through the intricacies of trusts and help you navigate this practical wealth management approach.


Pensions are an important wealth planning tool as they are outside of your estate for inheritance tax purposes. They are also one of the most efficient investment vehicles.

There are, however, many elements to consider from risk appetite to when and how you might want to access your pension. There is no ‘one-size-fits-all’ approach, and professional financial advice is key to ensure your estate planning strategy is designed to meet your future financial and lifestyle goals.



Ensuring the financial wellbeing of your family members during emotionally challenging times is paramount to many individuals. Protection cover can provide liquidity to cover some, or all, of the IHT bill, or any other associated costs with death.

It is important to review your cash flow forecast to assess how much money you might need to maintain your lifestyle, consider future long-term care needs, and how you might use any surplus efficiently.


Business relief

Business relief presents an opportunity to incorporate tax-efficient planning into your overall strategy. This relief applies to assets that meet specific conditions and can be valuable to your wealth management plan. Bringing in specialist wealth planning expertise can assist you in leveraging this relief effectively.


Financial control

Collaborating with your legal adviser, a wealth planner can support you in appointing a lasting power of attorney, enabling your loved ones to manage your financial affairs should you become unable to do so. Additionally, a professionally written will ensures that your assets are distributed to the right individuals, and at the right time, in accordance with your wishes.

Estate planning is about enjoying your wealth today, while deciding who benefits when you are gone. A tailored wealth transfer plan ensures your financial needs are considered for today and that your assets are passed on to the right people at the right time.

If you are considering your estate plan, our wealth planning team can help. To book a consultation with a wealth planner, please contact your Arbuthnot Latham relationship manager or find out more about becoming a client.



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Director, Wealth Planning - London
Direct: 020 7012 2677
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