The majority of wealthy women, including those expecting inheritance in the future, are largely unprepared for the substantial transfer of wealth that is expected to take place in the coming decades, according to a recent report by UBS[1]. Given their longer life expectancies, many women are expected to experience two major inheritance events in their lifetime, first from parents and later from their spouse.
Wealth management is becoming increasingly important as the largest ever transfer of wealth from one generation to another is expected to occur in the next 30 years, with somewhere in the region of £5.5tn-£7tn passing on in the UK[2]. In light of this, inheritance planning is changing, moving away from being largely the preserve of a select few ultra-high-net-worth individuals to being increasingly valuable for large swathes of the population.
Rising property prices, asset price inflation and frozen tax thresholds mean that more and more people are being dragged into paying inheritance tax (IHT), with HMRC receipts reaching £7bn between April 2024 and January 2025[3]. Given that even though this figure is large, it represents less than 1% of total tax revenues and was levied on only 4% of the population, a chancellor looking to shore up public finances may find IHT an appealing target.
Growing and preserving intergenerational wealth has been challenging, according to history. At Quilter Cheviot we recognise that discussions with loved ones around death and legacy can be difficult, but we believe it is much easier to talk about it when you are in a stable position in your life. Managing finances and investing are often emotive, so it is far from ideal to make big decisions when you’re going through emotional distress linked to sickness or bereavement. Even high-level discussions with practical steps of who to contact if you become incapacitated can make the process far less painful.
We help our clients look at various ways they could reduce their IHT liability, pass on as much wealth as possible to loved ones, and structure their family wealth to suit their own needs and circumstances.
What is inheritance tax?
A 40% inheritance tax rate is generally charged on the value of everything owned above an allowable threshold, known as the nil rate band. The nil rate band is currently set at £325,000 and is frozen until 2030. There is also a residence nil-rate band, which means that no IHT is charged if a home is left to “direct descendants”. The residence nil rate is currently £175,000 and also frozen until 2030.
How can I reduce my IHT bill?
The main approach to avoiding inheritance tax is to reduce the value of your estate. The smaller your estate on death, the less your IHT liability will be.
Gifting and exemptions:
You can reduce the value of your estate and therefore the amount of IHT you are liable for by “gifting away” some of it during your lifetime. Some gifts are completely free of IHT whereas others will still be liable, albeit at a reduced rate in many cases.
There is no IHT to pay on transfers between most married couples or civil partners living in the UK, whatever the amount. However, if you do decide to pass your estate on to your spouse or civil partner, a potential liability can build up again on their death. This is why many couples decide to pass their estate on to their children or grandchildren.
Individuals are entitled to give away £3,000 in any tax year, free from IHT. The allowance can be backdated by one year, meaning a married couples could give away a total of £6,000 a year without incurring IHT (or £12,000 if the previous year’s allowances were unused).
Wills:
Writing a will and keeping it up to date is an essential part of estate planning and can also be used to reduce a potential tax bill. Many people incorrectly believe that their whole estate will go to their spouse or civil partner when they die. However, without a will, this may not be the case.
Business relief:
Owners of businesses are eligible for certain tax reliefs, depending on the type of business. In many instances, a business transfer on death is completely from any IHT liability.
AIM investments:
Investors can receive business relief from owning shares of companies listed on the Alternative Investment Market (AIM), a sub-market of the London Stock Exchange that serves smaller, less-developed businesses. If the company’s activities meet the criteria, and shares are held for at least two years, then the shares benefit from 100% IHT relief for clients passing before 6 April 2026, and 50% IHT relief for those passing after this date. Due to the sophisticated nature of these investments, it is best to explore them through a reputable, regulated provider, such as Quilter Cheviot’s AIM strategy.
This article is intended as an introduction to inheritance tax and if you would like to know anything further, please don’t hesitate to download our IHT and wealth transfer guide or get in contact with a member of the Quilter Cheviot team who can assist you with any queries
[1] 80% of women face challenges when inheriting wealth: UBS | Paperjam English News
[2] £7 trillion is changing hands: what the great wealth transfer means for you | Unbiased
[3] IHT nears record as receipts rise to £7bn - FTAdviser
Trusts, estate planning, mortgage, tax: Trusts, Estate planning, Buy to Let Mortgage, Taxation and Inheritance Tax Advice are not regulated by the Financial Conduct Authority.
Tax: Tax treatment varies according to individual circumstances and is subject to change.
Business Property Relief (BPR) and the Alternative Investment Market (AIM) are high risk and invest in assets that are high risk and can be difficult to sell such as shares in unlisted companies. The value of the investment and the income from it can fall as well as rise and investors may not get back what they originally invested, even taking into account the tax benefits. You should only consider these products if you are willing to take some risk with your capital. We will consider whether such products are suitable for you before recommending an investment.
The value of your investments and the income from them can fall and you may not recover what you invested.
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Approver: Quilter Cheviot Limited, 28 August 2025