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By Alex Davies

CEO and Founder, Wealth Club


How Landlords Can Minimise Inheritance Tax

New figures from HMRC this week show that the Treasury raked in another £4.1 billion in inheritance tax receipts in the months between April and October 2022. 

This is £500m more than in the same period a year earlier, continuing the upward trend. These figures are revealed just days after the Autumn Statement in which it was announced that the inheritance tax threshold of £325,000 will be frozen until April 2028.

These new figures demonstrate just how much the government’s inheritance tax take seems to be increasing without the need for any more freezes, thanks largely to the steady increases in house prices which are pushing more regular hardworking families above the threshold who are relying on money being passed down through the generations.


While the average bill is currently £216,000, research conducted by Wealth Club shows just that with this extended freeze combined with rampant inflation, average inheritance tax bills are conservatively estimated to reach £297,793 by 2025-26 and £336,605 by 2027-28.

There has been a total U-turn on inheritance tax over the last few months. From Liz Truss raising the hopes of the nation with a cut back in September, and now Jeremy Hunt announcing the extension of the freeze until 2028. This is another stealth tax and the case of the boiling frog is apt. The treasury hopes by leaving rates and allowances unchanged, inflation can do the hard work of turning the temperature up on tax payers without them noticing.

Contrary to what many think, inheritance tax doesn’t just affect the super-rich. It will be the thousands of hardworking families that will bear the brunt. Rampant inflation, soaring house prices and years of frozen allowances will magnify the tax take in the years ahead. More and more families are going to find themselves hit by death duties they might not expected or planned for.

How inheritance tax is calculated

Inheritance tax (IHT) of 40 per cent is usually chargeable if one’s assets exceed a certain threshold, after deducting any liabilities, exemptions and reliefs.

The threshold (nil rate band) has been £325,000 per single person since 6 April 2009 – and will stay frozen at this level up to and including 2028-29. 

There is an additional transferrable main residence nil rate band of £175,000 available when passing the family home down to children or other direct descendants.

Any unused threshold may be transferred to a surviving spouse or civil partner. So, a couple could currently potentially pass on up to £1m before IHT might apply.

The good news is that with some careful planning there are lots of perfectly legitimate ways you can eliminate or keep IHT bills to the minimum, so more of your wealth is passed on to your loved ones rather than being syphoned off by the taxman.

- 1. Make a will

Making a will is the first step you should take. Without it, your estate will be shared according to a set of pre-determined rules. That means the taxman might end up with more than its fair share.

- 2. Use your gift allowances

Every year you can give up to £3,000 away tax free. This is known as the annual exemption. If you didn’t use it last year, you can combine it and pass on £6,000. You can also give up to £250 each year to however many people you wish (but only one gift per recipient per year) or make a wedding gift of up to £5,000 to your child; up to £2,500 to your grandchild; up to £2,500 to your spouse or civil partner to be and £1,000 to anyone else. Beyond these allowances, you can pass on as much as you like IHT free. So long as you live for at least seven years after giving money away, there will be no IHT to pay. 

3. Make regular gifts

You can make regular gifts from your income. These gifts are immediately IHT free (no need to wait for seven years) and there’s no cap on how much you can give away, provided you can demonstrate your standard of living is not affected.

4. Leave a legacy – give to charity

If you leave at least 10 per cent of your net estate to a charity or a few other organisations, you may be able to get a discount on the IHT rate – 36 instead of 40 per cent ­– on the rest of your estate.

5. Use your pension allowance

Pensions are not usually subject to IHT for those under 75 years old – they can be passed on tax efficiently and, in some cases, even tax free. If you have any pension allowance left, make use of it.

6. Set up a trust

Trusts have traditionally been a staple of IHT planning. They can mean money falls outside an estate if you live for at least seven years after establishing the trust. The related taxes and laws are complicated – you should seek specialist advice if you’re considering this.

7. Invest in companies qualifying for Business Property Relief (BPR)

If you own or invest in a business that qualifies for Business Property Relief – the majority of private companies and some AIM-quoted companies do – you can benefit from full IHT relief. You must be a shareholder for at least two years and still be on death though.

8. Invest in an AIM IHT ISA

ISAs are tax free during your lifetime but when you die, or when your spouse dies if later, they could be subject to 40 per cent IHT. An increasingly popular way of mitigating IHT on an ISA is to invest in certain AIM quoted companies which qualify for BPR. You must hold the shares for at least two years and if you still hold them on death you could potentially pass them on without a penny due in inheritance tax.

9. Back smaller British businesses

The Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS) offer a generous set of tax reliefs. For instance, SEIS offers up to 50 per cent income tax and capital gains tax reliefs, plus loss relief if the investment doesn’t work out. But EIS and SEIS investments also qualify for BPR, so could be passed on free of IHT. 

10. Invest in commercial forestry

This is an underused option for experienced investors. Pension funds and institutions have long ploughed money into forestry. The Church Commissioners has a forestry portfolio worth £400 million. Commercial forest investments should be free of IHT if held for at least two years and on death. You should also benefit from capital appreciation in the value of the trees (and the land they are on) and from any income produced by harvesting the trees and selling the timber (this income may also be tax free).  

11. Spend it

One sure-fire way to keep your wealth away from the taxman’s hands is to spend it.

* Alex Davies is CEO and Founder of Wealth Club *

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    11,) spend it, job done !

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    Well I’m trying to figure out this in my head so I assume what you gave to Charity is exempt from tax. Ok say
    £10’000’000.00 Est x 40% = £4’000’000.00 tax,
    10’000’000.00 x 36%
    400’000.00 to Charity
    9’600’000.00 x 36%

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    Not making sense to me yet I was trying to text on the phone and use the phone for calculating and it took off

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    £9’600’000. X 36% = 3’456’000
    + the 400’000. you have given away =3’856’000 instead of £4m = 144’000. Differ’ so say
    £14’400.00 per £1m saving or not if I am wrong.
    Problem how can you can’t give it to the Charity you hate.


    Are there any charities out there that deserve it, seems most are really businesses paying their management fat six figure salaries, noses in troughs

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    Minimise Inheritance tax yes but for the living and Cost of living Crisis now, how about people minimising waste of their finances.
    I see little Mopeds appearing in every road where ever I am with people having takeaways delivered, it’s not cheap or always necessary how much is it costing them £5/6 a go or more ?. I can have breakfast at home for £1.00 it does me most of the day and work as good as anyone but many of them are doing nothing only putting on weight.
    Right for example I can have my porridge costs 15p, 2 eggs, 2 slices of bread and a tea.
    Make your own menu but don’t be having takeaways delivered 2/3 a day and expect working tax payers to keep you and pay for the roof over your head.


    Cookery isn't taught in schools any more, so how can you expect the dear little snowflakes to feed themselves

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    No wonder they can’t live or buy their own place.

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    Do they teach managing money and budgeting at school? I remember in school the physics teacher once asked 'what would you like to learn today' I suggested how to wire a plug and that's how I learnt to wire a plug properly. Remember the days when you had to fit a plug on every new appliance?


    Who would teach managing money and budgeting at school, god that would be the blind leading the blind

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    My son has been self studying about investing money (he wants to make his money make money without much effort) for many years. He dabbled being a landlord, peer to peer lending etc. and has concluded, for him at least, the best option is stocks and shares ISA with a wide range of investments, some medium risk, some low risk. Before the recent higher inflation he was getting around 7-10% return. This was with no effort, no tax and little risk.

    After buying his home, when interest rates were low, he took out a 5 year fixed and borrowed 15k more then he needed and put that into his ISA. He also wanted to replace his old conservatory, so put that on a zero % credit card, when the interest free period was about to run out, he took out another credit card and transferred the balance (with not fees!). He has the money to pay off the card, but instead it is earning him interest.


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