IHT Planning for Financial Advisers & IFAs (2025 Guide)

James had been a financial adviser for 15 years. He'd guided hundreds of clients through pension transfers, investment strategies, and retirement planning. But when Sarah, his 58-year-old client with a £2.3 million estate, asked a simple question, he froze.

"So my pension won't be taxed when I die, right? That's still the case?"

James knew the rules were changing in April 2027. He knew business relief was being reformed in April 2026. But sitting across from Sarah, the details blurred together. Which change affected her £800,000 pension? What about her £400,000 AIM portfolio that was supposed to be IHT-free?

"Let me review the latest guidance and get back to you," he said. Walking back to his office, he realized he needed more than fragments of information—he needed a comprehensive strategy framework for the entire shifting IHT landscape.

60% of financial advisers report increased client requests for estate planning advice since the 2024 Autumn Budget, yet the regulatory landscape is fragmenting across three different implementation dates. IHT receipts hit £8.2 billion in 2024/25—up 10.8% year-on-year—and frozen allowances mean more middle-class estates are being caught in the net.

This guide provides the comprehensive strategy framework advisers need to navigate 2025-2027 while strengthening client relationships.

Disclaimer: This article provides general information about inheritance tax planning strategies and does not constitute financial, legal, or tax advice. Financial advisers should consult relevant technical resources, legislation, and specialists (solicitors, tax advisers) before making recommendations to clients. Rules and thresholds are correct as of October 2025 but may change. For complex estates or specific client situations, always recommend professional legal advice.

The IHT Landscape Financial Advisers Face in 2025

The inheritance tax environment has fundamentally shifted. The nil rate band remains frozen at £325,000 until 2030, where it's been stuck since 2009. The residence nil rate band adds £175,000, also frozen until 2030, but only when qualifying property passes to direct descendants.

Combined, a married couple can potentially pass £1 million tax-free—but the residence nil rate band tapers away at £1 for every £2 over a £2 million estate value. For your high-net-worth clients, this relief disappears entirely.

The numbers tell the story of increasing pressure. IHT receipts reached £8.2 billion in 2024/25, an increase of £0.8 billion from the previous year. The Office for Budget Responsibility forecasts this will hit £9.1 billion in 2025-26.

Why this matters for advisers: IHT is not DIY-friendly. It requires coordination between financial advice, legal structures (wills and trusts), and tax planning. Your clients expect you to navigate this complexity—or at least identify when specialist help is needed.

The cascade effect compounds the problem. Clients who ignore IHT planning don't just pass assets to their families—they pass tax problems. Beneficiaries inherit both wealth and the burden of settling tax liabilities, often needing to sell assets to pay HMRC.

Your role has never been more critical. As frozen thresholds and rising asset values pull more estates into the IHT net, proactive planning separates exceptional advisers from those who simply react to events.

Three Major Rule Changes Financial Advisers Must Master (2025-2027)

Three seismic shifts are reshaping IHT planning. Each arrives on a different date, affecting different clients, requiring different responses.

Change 1: Domicile Rules → Long-Term Residence Test (6 April 2025)

The old domicile-based system has been replaced with a residence-based test. From 6 April 2025, individuals who've been UK resident for at least 10 out of the previous 20 tax years are considered long-term residents for IHT purposes.

Their worldwide assets—not just UK property—become subject to IHT. Previously, non-domiciled individuals could shelter overseas assets from UK IHT regardless of residence length.

What this means for advisers: Review portfolios for clients who've lived in the UK 10+ years or were previously UK residents. Their offshore investments, foreign property, and overseas business interests now fall within the IHT net. This affects successful entrepreneurs, relocated executives, and anyone with international assets.

The "tail" period compounds the impact. Even after leaving the UK, individuals remain within scope for 3 to 10 years depending on their length of prior UK residence. A client who lived here for 15 years faces a 5-year tail before escaping IHT on non-UK assets.

Change 2: Business Relief and Agricultural Property Relief Reform (6 April 2026)

A combined £1 million allowance now caps 100% relief on business and agricultural assets. Assets exceeding this threshold receive only 50% relief, creating an effective 20% IHT rate on the excess.

The mathematics are stark. A client with £3 million in qualifying business property previously paid zero IHT. From April 2026: first £1 million receives 100% relief (£0 tax), the remaining £2 million receives 50% relief, creating a £400,000 IHT liability (20% effective rate).

AIM shares receive particularly harsh treatment: 50% relief on the entire holding, with no access to the £1 million allowance. Previously marketed as IHT-efficient investments, AIM portfolios now face the same 20% effective rate as excess business assets—but from the first pound, not after £1 million.

Consider David, who invested £2 million in AIM shares specifically for IHT planning. Under the old rules: £0 IHT. Under the new rules from April 2026: £400,000 IHT liability. That's not a planning tweak—that's a fundamental strategy failure if you don't act now.

What this means for advisers: Audit every portfolio with AIM exposure, EIS investments on AIM, business assets, or agricultural property. Calculate new potential liabilities. For business owners, this transforms succession planning from "nice to have" to "critically urgent." The two-year holding requirement still applies, so new investments made now won't qualify until 2027 anyway.

Change 3: Pensions Subject to IHT (6 April 2027)

This is the earthquake. From 6 April 2027, unused pension funds and death benefits will be included in the estate for IHT purposes. This applies to both defined contribution and defined benefit schemes.

Following consultation, personal representatives—not scheme administrators—will be responsible for reporting and paying the IHT. Death-in-service benefits and dependant scheme pensions from DB arrangements remain excluded.

The impact is massive. Government estimates suggest 10,500 estates will have an IHT liability where previously they wouldn't. Around 38,500 estates will pay more IHT than before. The average increase? £34,000.

What this means for advisers: The "pension as IHT shelter" strategy that dominated planning for 20+ years is dead. Complete strategic rethink needed for every client with pension pots exceeding £200,000. The wealth sequencing conversation—spend pension first or preserve it—must be completely reframed.

Change	Effective Date	Key Impact	Immediate Action for Advisers
Long-term residence test	6 April 2025	Worldwide assets in IHT scope after 10 years UK residence	Review non-dom client portfolios; identify overseas assets now exposed
Business/agricultural relief cap	6 April 2026	£1m limit on 100% relief; 50% relief on excess; AIM shares 50% only	Value business assets; calculate new IHT exposure; review AIM holdings
Pensions in estate	6 April 2027	Unused pensions subject to 40% IHT; potential double tax post-75	Model pension vs. non-pension wealth sequencing; update withdrawal strategies

The 2027 Pension IHT Change—How Advisers Should Respond

For two decades, advisers built estate planning strategies on a simple foundation: pensions escape IHT. Preserve the pension, spend other assets, leave the pension pot to beneficiaries tax-efficiently.

That foundation is crumbling.

From 6 April 2027, unused defined contribution pensions, unused defined benefit pensions, and lump sum death benefits all fall within the estate for IHT purposes. The only exclusions: death-in-service benefits and dependant's scheme pensions from DB arrangements.

Personal representatives become liable for the tax, not scheme administrators. This creates complexity—how do you value a DB pension death benefit at the moment of death? HMRC promises guidance, but advisers need workable strategies now.

The Double Taxation Trap

The cruelest aspect hits post-75 deaths. Lump sum death benefits face 40% IHT, then the remainder gets taxed as income at the beneficiary's marginal rate.

Watch what happens to Michael's £500,000 unused pension when he dies at 76. His estate already exceeds the nil rate band, so the full pension is chargeable. IHT: £200,000 (40%), leaving £300,000. His daughter receives this as a lump sum death benefit, taxed at her 40% marginal rate: £120,000 income tax.

Net inheritance: £180,000. Effective combined tax rate: 64%. Michael worked 40 years building that pension—HMRC takes nearly two-thirds.

This isn't losing an IHT "relief." Pensions never formally had IHT relief—they simply sat outside the estate. This is bringing them inside, fundamentally altering the planning landscape.

Strategic Responses for Advisers

1. Pension pot audit: Review every client with pension assets over £200,000. Those approaching retirement with substantial pensions need immediate strategy sessions.

2. Sequencing recalculation: Model scenarios comparing "spend pension first" versus "preserve pension." The old assumption—always preserve the pension—no longer holds. For many clients, drawing pension income early and preserving other assets now makes more sense.

3. Annuitization consideration: For clients who don't need pension flexibility and want certainty, annuities remove the capital from the estate entirely. The income stream provides living expenses without creating an IHT liability on death. This traditional approach suddenly looks modern again.

4. Gift strategies intensify: If preserving pension wealth is impossible without IHT, consider whether clients should draw pension income specifically to fund lifetime gifts. The 7-year rule still works—gifts that survive seven years escape IHT entirely.

5. Will coordination: Pension death benefit nominations must align with will provisions. Many clients haven't updated nominations in years. These now carry IHT consequences and need reviewing alongside overall estate strategy.

The critical point: this isn't about losing an IHT relief. This is about planning assumptions built over 20 years becoming obsolete overnight. Advisers who master this transition will differentiate their practices significantly.

Business Relief Strategies Post-2026 Reform

Business relief remains valuable—it's just no longer unlimited. Understanding the new structure is essential for business owners and investors who've relied on this planning tool.

The £1 million combined allowance applies to business property and agricultural property together. You get 100% relief on the first £1 million, then 50% relief on everything above, creating a 20% effective IHT rate.

AIM shares face worse treatment: 50% relief on the entire holding, with no access to the £1 million allowance. An AIM portfolio worth £2 million faces £400,000 IHT regardless of other business assets.

The two-year holding requirement hasn't changed. Assets must be held for two years before death to qualify. This means planning ahead—gifts or acquisitions made in 2025 won't qualify until 2027 at the earliest.

Client Scenarios Reveal the Impact

Scenario 1: Business owner with £800,000 company shares

Rachel owns 100% of a qualifying trading company valued at £800,000. Under both old and new rules: 100% relief applies, £0 IHT. No change for businesses under £1 million.

Scenario 2: Business owner with £2.5 million company shares

Thomas owns a business valued at £2.5 million. First £1 million: 100% relief (£0 tax). Remaining £1.5 million: 50% relief, taxable amount £750,000, IHT £300,000 (40% of £750k). Effective rate on excess: 20%.

Previously: £0 IHT. From April 2026: £300,000 liability. This isn't a minor adjustment—it's a fundamental change to succession planning.

Scenario 3: Investor with £2 million AIM portfolio

Jennifer built a £2 million AIM portfolio specifically for IHT efficiency. Under new rules: 50% relief on entire amount, taxable amount £1 million, IHT £400,000 (40% of £1m). Effective rate: 20% on the whole portfolio.

Previously: £0 IHT. From April 2026: £400,000 liability. The IHT benefit that justified the investment risk has been halved.

Adviser Actions Before April 2026

Value business assets now: Establish a baseline valuation before April 2026. This helps calculate exposure and track changes. Many business owners have outdated valuations—update them.

Consider lifetime gifts of excess business assets: Business assets gifted more than seven years before death escape IHT entirely. If a client's business exceeds £1 million and they can afford to gift shares to family, the 7-year clock starts ticking. Even partial gifts reduce the exposure.

Review AIM portfolio justification: Is the remaining IHT benefit worth the underlying investment risk? AIM shares carry higher volatility than FTSE alternatives. With only 50% relief, does the risk-reward balance still work? For some clients, selling AIM holdings and redeploying into lower-risk investments makes sense, accepting the IHT exposure.

Accelerate succession planning for business owners: Business relief made succession planning "something to think about later." That luxury is gone. Clients with businesses worth over £1 million need active succession strategies now—whether that's family transition, management buyouts, or third-party sales.

The good news? The £1 million allowance refreshes every seven years for lifetime gifting (and every ten years for trusts). Strategic gifting can reset the clock. This creates planning opportunities for clients willing to part with assets during lifetime.

Gifting Strategies—The 7-Year Rule and Taper Relief Explained

Gifting remains one of the most powerful IHT planning tools, yet it's also the most misunderstood. Clients hear "7-year rule" and think they understand it. They rarely do.

Potentially Exempt Transfers (PETs)

Gifts of unlimited value become exempt from IHT if the donor survives seven years. Make a £500,000 gift today, survive seven years, and it's entirely outside your estate. The recipient owes nothing.

If you die within seven years, the gift becomes chargeable. IHT becomes payable by the recipient, not by your estate. This surprises many clients—they assume their estate covers all tax.

Critical point: the 7-year clock restarts with each new gift. Make annual gifts and the exposure extends. Some advisers recommend completing all gifting in a single year to start one clear 7-year countdown.

Taper Relief: Understanding What Gets Reduced

Taper relief only applies if total gifts in the 7 years before death exceed the £325,000 nil rate band. This is crucial—it doesn't help with small gifts.

More importantly, taper relief reduces the tax, not the gift value. Many clients expect the gift itself to be reduced. That's not how it works.

The scale:

Years 0-3: No taper relief, full 40% IHT rate applies
Years 3-4: 20% reduction in tax (effective rate 32%)
Years 4-5: 40% reduction in tax (effective rate 24%)
Years 5-6: 60% reduction in tax (effective rate 16%)
Years 6-7: 80% reduction in tax (effective rate 8%)
Year 7+: 100% exempt (effective rate 0%)

Emma, 62, gifts £500,000 to her daughter in 2025. She dies in 2029, four and a half years later. The gift exceeds the nil rate band by £175,000. Taper relief (40% reduction for 4-5 years) applies only to the tax on that excess.

Calculation: £175,000 excess × 40% = £70,000 tax. Apply 40% taper relief: £70,000 × 60% = £42,000 final tax due. Emma's daughter owes £42,000, not £70,000. The gift itself remains £500,000—taper relief just reduces the tax burden.

Annual Exemptions—Small but Useful

The £3,000 annual gift allowance can be carried forward one year if unused, creating a potential £6,000 in one year. Not significant for large estates, but consistent use adds up.

Small gifts of £250 per person to unlimited recipients fall outside the estate immediately. Parents with multiple children and grandchildren can distribute £250 to each annually without any IHT consequence.

Wedding gifts carry specific allowances: £5,000 from a parent, £2,500 from a grandparent or great-grandparent, £1,000 from anyone else. These are immediately exempt.

The most powerful exemption: regular gifts from surplus income. If you can demonstrate the gifts form part of your normal expenditure and don't reduce your standard of living, they're exempt immediately. No 7-year wait, no limit.

This requires meticulous documentation. Clients must show regular pattern (monthly, annually), surplus income (not capital), and maintained living standards. HMRC scrutinizes these claims, so record-keeping is essential.

Adviser Strategy Framework

Start early: Clients in their 60s with clear wealth surplus should begin gifting now. The 7-year clock is unforgiving—waiting until 75 significantly reduces the odds of survival beyond the charge period.

Document "normal expenditure" gifts meticulously: Create a simple tracking system for clients making regular gifts from surplus income. Spreadsheets, bank statements, letters to beneficiaries—anything that demonstrates the pattern.

Use annual exemptions consistently: £3,000 per year for 20 years is £60,000 outside the estate. Encourage clients to use it every year, even if the amounts feel small.

Consider "gift and insure" strategies: For clients who want to gift but worry about dying within seven years, term life insurance can cover the potential IHT liability. The premium is usually far less than the tax saved if they survive seven years. The policy pays out if they die early, covering the gift tax. If they survive, the policy expires and the gift is exempt.

The 7-year rule isn't complex—it's just specific. Clients who understand it properly can transfer significant wealth without tax. Those who misunderstand it leave their families with unexpected bills.

Trusts in IHT Planning—When to Recommend Them

Trusts are not IHT magic wands. They're complex legal structures with costs, compliance requirements, and ongoing administration. For many straightforward estates, they create more problems than they solve.

But for specific situations, trusts remain invaluable.

When Trusts Make Sense

Vulnerable beneficiaries: Adult children with addiction issues, mental health conditions, or learning disabilities may not be capable of managing substantial inheritances. Discretionary trusts allow trustees to control distributions, protecting beneficiaries from themselves or from predatory third parties.

Control concerns: Parents who want assets to benefit children but don't trust their children's spouses or partners often use trusts. If a child divorces, assets held in discretionary trust are typically protected from divorce settlements.

Second marriages: Life interest trusts solve the classic dilemma—ensuring the surviving spouse has income for life while guaranteeing capital passes to children from a first marriage. Without a trust, the surviving spouse could disinherit the stepchildren entirely.

Business succession: Trusts can hold business shares, separating ownership from control. This allows gradual transition to the next generation while preserving operational continuity.

Large estates with generational planning: For estates where IHT is unavoidable, trusts can manage wealth across multiple generations efficiently. The 10-yearly charge (maximum 6% on value over nil rate band) may be cheaper than repeated IHT charges at each generational death.

Common Trust Types

Discretionary trusts: Trustees have full discretion over distributions to beneficiaries. Maximum flexibility, maximum control. Useful when circumstances change unpredictably—beneficiaries' needs shift, family relationships evolve. The trade-off: 10-yearly IHT charges and exit charges when assets leave the trust.

Life interest trusts: One beneficiary receives income for life, capital preserved for others (often children). Common in second marriages. The life tenant has no access to capital, preventing them from depleting assets intended for remaindermen.

Bare trusts: Simplest structure. Beneficiary entitled to assets at age 18. Minimal IHT advantage (the gift is a PET, subject to 7-year rule). Mainly useful for control until the child reaches maturity, not tax efficiency.

IHT Treatment of Trusts

Assets in discretionary trusts face a 10-yearly charge—6% maximum on value exceeding the nil rate band. The actual rate depends on how much of the settlor's nil rate band remains available.

Exit charges apply when assets leave the trust before the next 10-year anniversary. The calculation is proportionate to time held and the rate applied at the last charge.

Gifts into trust are immediately chargeable lifetime transfers. If the gift exceeds the nil rate band, 20% tax applies immediately (half the 40% death rate). If the settlor dies within seven years, an additional charge brings the total to 40%, with credit for the 20% already paid.

The calculations are complex enough that specialist advice is essential. Advisers should understand when trusts are appropriate but should never attempt DIY trust creation or tax calculation.

When Trusts Are Overkill

Simple estates under £1 million: Married couples with straightforward beneficiary intentions don't need trust complexity. Spousal exemption handles the first death tax-free, and both nil rate bands apply on the second death.

Everything to spouse first: If a couple wants everything to pass to the surviving spouse, then to children, a simple will achieves this without trust costs or complications.

Clients wanting simplicity and low costs: Trusts require legal setup (£1,500-£5,000+), annual accounts, tax returns, trustee meetings. For clients who value simplicity, this burden outweighs the benefits.

Adviser Approach to Trusts

Position trusts honestly: they're legal structures solving specific problems, not tax magic. For the right client in the right circumstances, they're invaluable. For many others, they're expensive complexity.

Always involve a solicitor for trust creation. DIY trust forms found online are dangerous—subtle drafting errors create tax disasters. The £2,000-£5,000 legal fee is cheap compared to the cost of getting it wrong.

For many clients, a well-drafted will plus strategic lifetime gifting achieves the same outcome with far less complexity. IHT saved through a trust might be offset by the costs of maintaining it for 20 years.

When you identify a client who genuinely needs a trust—vulnerable beneficiary, second marriage, business succession—make the referral to a specialist. Know your boundaries, protect your clients, and build your network of trusted experts.

For clients who need straightforward will protection without trust complexity, you can recommend WUHLD's online will service as an accessible starting point.

Charitable Giving—The 36% IHT Rate Strategy

Charitable giving creates a rare win-win in IHT planning: benefiting causes clients care about while reducing the tax rate on their estate.

The standard IHT rate is 40% on the estate above the nil rate band. Leave at least 10% of your net estate to charity, and the rate drops to 36%.

This isn't intuitive. Clients hear "give away 10% to save 4%" and question the mathematics. But the 4% rate reduction often exceeds the 10% charitable gift, particularly for larger estates.

The Mathematics Explained

Consider an estate worth £1 million. Without charitable giving:

Taxable estate after nil rate band (£325,000): £675,000 IHT at 40%: £270,000 Net to family: £730,000 (£1,000,000 - £270,000)

With 10% charitable gift (calculated on baseline amount after nil rate band):

10% of £675,000 = £67,500 to charity Taxable estate: £607,500 IHT at 36%: £218,700 Total deductions: £286,200 (charity £67,500 + IHT £218,700) Net to family: £713,800

The family receives £16,200 less (£730,000 vs £713,800), while charity receives £67,500. For many clients motivated by legacy and values, this trade-off is worthwhile—the family gets almost as much, a worthy cause receives substantial support, and HMRC gets less.

For estates significantly above the IHT threshold, the mathematics become even more favorable. At £2 million estates, the family's reduction is often under 5% of what they would have received, while charities gain substantially.

When to Recommend This Strategy

Clients with existing charitable intent: If a client already planned to leave something to charity, structuring it to reach the 10% threshold optimizes both the gift and the tax position.

Estates significantly over the threshold: The larger the taxable estate, the more the 4% rate reduction offsets the 10% gift. For estates of £2 million+, the numbers work particularly well.

Values-driven clients: Some clients care more about legacy and impact than maximizing family inheritance. For them, the 36% rate provides a tax-efficient structure for their charitable goals.

Clients with no financial dependents: Widowed clients with independent adult children sometimes prefer to benefit charity significantly, with family receiving a smaller but still substantial inheritance.

Practical Implementation

The charitable gift can be structured through the will, as a lifetime donation, or via a trust. The election for the reduced rate must be made within two years of death.

Even if the will doesn't include a sufficient charitable gift, beneficiaries can execute a Deed of Variation within two years of death to redirect part of their inheritance to charity, qualifying for the 36% rate retroactively.

Include charitable giving in estate planning conversations, but never pressure clients. This strategy works when it aligns with client values—forced or artificial charitable giving to chase a tax rate feels wrong and often is.

Survey data suggests 60% of advisers expect more clients to consider charitable gifts following recent IHT changes. As effective rates rise due to pension inclusion and reduced business relief, charitable giving becomes relatively more attractive.

The Will Conversation—Why Every IHT Plan Needs One

IHT planning without a valid will is like building a house without foundations. You might create sophisticated strategies around pensions, gifts, and business relief—but if intestacy law distributes the estate, everything fails.

The will is the legal document that makes your planning real. Without it, intestacy rules dictate who inherits, regardless of what you advised or what your client intended.

How Wills Enable IHT Planning

1. Spousal exemption optimization: Married couples can pass unlimited assets to each other tax-free. But this requires a will that specifies the spouse as beneficiary. Intestacy might not achieve this, particularly for unmarried partners who receive nothing under intestacy law.

2. Residence nil rate band qualification: The £175,000 additional nil rate band only applies when residential property passes to direct descendants. The will must explicitly direct the property to children or grandchildren. Leave it to a sibling or friend, and the RNRB is lost—costing the estate £70,000 in unnecessary tax.

3. Trust coordination: If your client needs a life interest trust for a second marriage or a discretionary trust for vulnerable beneficiaries, the will creates that structure. No will, no trust. The planning conversation you had becomes meaningless.

4. Charitable gifts for 36% rate: To access the reduced IHT rate, the will must include specific charitable legacies totaling at least 10% of the baseline estate. This can't be arranged after death without beneficiary cooperation via Deed of Variation.

5. Executor powers: The will appoints executors and grants them necessary powers to manage the estate efficiently. Executors need flexibility to use the two-year Deed of Variation window if beneficial, to make claims for reliefs, and to manage assets before distribution. The will gives them that authority.

The Adviser's Role in Will Planning

You don't write wills unless you're also a qualified solicitor. Your role is identifying the need for a will as part of holistic financial planning.

Think of it as a checklist item in every comprehensive client review: "Do you have a will? When was it last updated? Does it reflect your current intentions and our IHT strategy?"

If the answer reveals a gap, your recommendation carries weight. Clients trust your guidance on will providers just as they trust your investment recommendations.

Positioning Will Solutions Appropriately

For complex estates: Business assets, international property, discretionary trusts, vulnerable beneficiaries, or intricate family structures need specialist solicitors. These estates justify the £1,500-£3,000+ cost for bespoke legal drafting.

For straightforward estates: Married couples, simple beneficiary structures, estates under £1 million, no complex trusts—these clients need fast, affordable, legally valid wills without solicitor complexity.

WUHLD's £49.99 online will service serves this straightforward segment perfectly. Clients complete the process in 15 minutes online, preview their will free before paying, and receive a legally valid UK will plus comprehensive guides for executors and inheritance tax planning.

This isn't "cheap" will writing—it's appropriate solution matching. The technology handles the straightforward cases efficiently, freeing your complex-estate clients to receive proper solicitor attention.

Position it this way: "For your situation, you need baseline will protection quickly and affordably. WUHLD gives you that foundation. If your circumstances become more complex—second marriage, business sale, international assets—we'll arrange specialist legal advice. But right now, this gets you protected."

The key message: the best IHT plan fails without a valid will. Make will creation part of every estate planning conversation. Understand when clients need solicitors versus when online services are appropriate, and guide them accordingly.

How to Structure Client Conversations About IHT Planning

Raising IHT planning doesn't require complex preambles or awkward introductions. It's a natural part of comprehensive financial advice—when you know the right framework.

When to Raise IHT Planning

Annual reviews for clients over 55: Once clients enter their mid-50s, mortality becomes real enough to discuss professionally. Annual reviews should include estate planning alongside pension and investment discussions.

Wealth accumulation milestones: When clients receive inheritances, sell businesses, or experience significant property value increases, their IHT exposure changes materially. These moments create natural opportunities for estate planning conversations.

Life events trigger urgency: Marriage, divorce, children born, grandchildren arriving, retirement—each shifts family structure and intentions. These are the moments clients are already thinking about legacy and protection.

Regulatory changes like 2025-2027 reforms: The pension, business relief, and residence rule changes create proactive conversation starters. "Given the changes coming in 2027, let's review how your pension fits into your overall estate strategy."

The Four-Phase Conversation Framework

Phase 1: Asset Discovery (10 minutes)

Start with comprehensive valuation. "Let's review the total value of everything you own—property, pensions, investments, business interests, life insurance death benefits."

Build the complete picture. Many clients underestimate their estate value because they think in silos—house separate from pension separate from investments. When you total it, they're often surprised.

Calculate the IHT exposure clearly: subtract nil rate band (£325,000), subtract residence nil rate band if applicable (£175,000), multiply the remainder by 40%.

Show the number. For a £1.2 million estate (typical London couple with paid-off home and decent pensions): taxable amount £525,000 (after £325k + £175k + spousal exemption on first death), potential IHT £210,000. That number focuses attention immediately.

Phase 2: Beneficiary Intentions (5 minutes)

"Who do you want to inherit, and in what proportions?"

Listen for complexity: second marriages, estranged children, vulnerable beneficiaries, unmarried partners, charitable wishes. Each adds layers requiring specific solutions.

"Are there any concerns about beneficiaries? Age, capability, relationships that worry you?"

This reveals whether simple will distribution works or whether trusts, conditions, or protective structures are needed.

Phase 3: Strategy Discussion (15-20 minutes)

Present options with concrete numbers, not abstract concepts. Model scenarios using their actual figures.

"If we start gifting £50,000 annually from your surplus income, and you survive seven years, that's £350,000 outside your estate—saving £140,000 in IHT."

"Your pension is £800,000. Under the new 2027 rules, that's £320,000 of IHT unless we adjust your withdrawal strategy. Let's compare spending pension first versus preserving it."

Discuss will status explicitly: "Do you have a will? When was it last updated?" The answer is often "somewhere, I think" or "we made one 15 years ago when the kids were born."

Explain how outdated or missing wills undermine everything else: "All this planning requires a will that reflects your current intentions and coordinates with our strategy."

Phase 4: Action Plan (5 minutes)

Create prioritized next steps with specific deadlines:

"Update your will—I'll recommend an appropriate provider today"
"Begin annual gifting using the £3,000 allowance plus £250 per grandchild"
"Review pension withdrawal strategy by next month, modeling the 2027 changes"
"Schedule trust consultation with my solicitor contact if you decide the family protection trust makes sense for your situation"

Set follow-up review dates—annually at minimum, or whenever circumstances change materially.

Communication Tips That Resonate

Use concrete numbers, not percentages. "£280,000 IHT bill" hits harder than "40% rate." Clients don't think in tax rates—they think in pounds lost.

Frame emotionally but professionally: "This planning ensures your family receives what you intend, not what the tax system dictates. You've built this wealth for them—let's make sure they actually get it."

Normalize the conversation: "This is standard planning for estates over £325,000. Given your property value alone, this affects you. You're not unusual—you're actually typical of successful professionals who've built assets over a career."

Position yourself as coordinator: "I'll help you understand the options and model the scenarios. For the legal structures and will creation, I'll recommend specialists with expertise in your specific situation. My role is ensuring all the pieces work together."

What to Avoid

Don't promise specific tax outcomes. Laws change, circumstances change, asset values fluctuate. Promise process and diligence, not guaranteed results.

Don't recommend legal structures outside your qualification. You can explain what trusts do and when they're useful. You can't draft them or choose the specific type without legal training.

Don't pressure clients to act immediately. Give them time to consider options, discuss with family, and make decisions that feel right. Forced urgency creates buyer's remorse and strained relationships.

The best IHT planning conversations feel like natural extensions of existing advice relationships. You're simply expanding the scope from "wealth accumulation" to "wealth preservation and transition." Clients who trust you with their financial futures will trust you with their legacy planning—when you demonstrate the expertise and boundaries that justify that trust.

Building Your IHT Planning Toolkit—Resources for Advisers

Professional competence requires staying current with technical resources, calculation tools, specialist referral networks, and client education materials. Here's what belongs in every adviser's IHT planning toolkit.

Essential Technical Resources

HMRC Inheritance Tax Manual remains the authoritative source for detailed technical guidance. Bookmark specific sections relevant to recurring client situations—business relief, agricultural property, gifts with reservation, excluded property trusts.

Gov.uk IHT thresholds and rates are updated annually. Check before every client meeting to ensure you're using current figures. Quoting outdated thresholds destroys credibility instantly.

STEP (Society of Trust and Estate Practitioners) provides specialist referral networks for complex cases. When you encounter estates beyond your expertise—offshore trusts, international succession, complex business structures—STEP members are your go-to referral partners.

Major providers like Royal London, Quilter, and M&G publish excellent technical guides aimed specifically at IFAs. These translate legislation into adviser-friendly language with practical examples. Royal London's technical zone is particularly comprehensive on the 2025-2027 changes.

Calculation Tools and Models

Basic IHT calculator: (Estate Value - £325,000 - RNRB if applicable) × 40%

Remember RNRB tapers at £1 for every £2 over £2 million, disappearing entirely at £2.35 million for individuals (£2.7 million for couples using transferable allowances).

Taper relief calculator needs to factor in the complete 7-year gift history. Many advisers use spreadsheets tracking client gifts chronologically, calculating exposure at various death dates. This visualizes the declining tax liability as time passes.

Pension IHT impact modelers are being added to major platforms post-2027. Until software catches up, build your own spreadsheets comparing:

Current position (pension outside estate)
2027+ position (pension at 40% IHT)
Double tax scenarios for post-75 deaths
Sequencing strategies (spend pension vs preserve pension)

The calculations aren't complex—it's the systematic application across all affected clients that challenges firms. Build reusable models once, deploy across your client base.

Referral Network Development

Specialist IHT solicitors: For trusts, complex estates, business succession, and anything involving intricate legal structures. Build relationships with 2-3 trusted solicitors who understand IHT deeply and communicate well with clients.

Will writers for different client segments: Not every client needs a £2,000 solicitor will. WUHLD serves the straightforward online segment (simple estates, married couples, under £1 million, no complex trusts). Local solicitors serve face-to-face preference clients. Specialist firms serve complex estates. Match the solution to the client need and fee sensitivity.

Chartered tax advisers: For businesses with complex agricultural property relief or business property relief situations, particularly those affected by the April 2026 £1 million cap. CTAs model the tax exposure and structure transactions to minimize liability within legal bounds.

The best referral networks are reciprocal. Solicitors and tax advisers who receive quality referrals from you will send their clients needing financial advice back to you. This builds a professional ecosystem where everyone wins—especially the clients.

Client Education Materials

Create a one-page IHT summary for your clients: thresholds (£325k NRB, £175k RNRB), rates (40% standard, 36% charitable), and key deadlines for 2025-2027 changes. Update this annually. Use it in every review meeting as a conversation starter.

Develop a gifting strategy guide explaining annual exemptions (£3,000, carry forward, £250 small gifts), PETs (7-year rule), and taper relief in client-friendly language. Include the taper relief table visually—clients need to see the declining tax rates over time.

"Do I need a will?" questionnaire identifies clients without basic protection. Simple yes/no questions:

Do you have a will? When did you make it?
Has your family situation changed since then (marriage, divorce, children, deaths)?
Does your will reflect your current intentions?
Do you know who your executors are and have you told them?

Negative answers to these basic questions reveal urgent gaps. This tool gives you a structured way to identify clients needing immediate will creation or updates.

WUHLD as Your Straightforward Will Solution

For clients needing baseline will protection without complex structures, recommend WUHLD. £49.99, 15 minutes online, legally valid UK will. Clients preview before paying—they see their complete will before committing to anything.

The service includes a 12-page Testator Guide, Witness Guide, and Inheritance Tax Planning Guide for beneficiaries. This gives executors the practical guidance they need without expensive solicitor consultations.

Position it appropriately: "For your straightforward situation, WUHLD gets you protected quickly and affordably. If circumstances become complex—business sale, second marriage, international assets—we'll arrange specialist advice. But this covers your immediate need."

Free up your time for complex advisory work by solving the "simple will" need efficiently. You can't profitably spend hours arranging solicitor appointments for every client needing a basic will. WUHLD handles that segment, letting you focus on sophisticated planning for complex estates.

Build your reputation through proactive IHT planning conversations. Clients remember the adviser who helped them protect their family's wealth—not just the one who managed their investments. This differentiates your practice in a crowded market where "holistic planning" is claimed by everyone but delivered by few.

Mastering the IHT Transition—Your Action Plan

The inheritance tax landscape is shifting beneath your clients' feet. Three major changes across 2025-2027 are rewriting planning strategies that worked for decades. The advisers who master this transition build relationships that span generations.

Key takeaways:

IHT planning is no longer optional for estates over £325,000—frozen allowances and rising asset values mean middle-class families are caught in the net, with receipts reaching £8.2 billion in 2024/25
Master the three critical changes: April 2025 residence-based test for domicile, April 2026 business relief cap at £1 million, and April 2027 pensions entering the estate for IHT
Gifting strategies and the 7-year rule remain powerful tools, but they require early action—clients in their 60s with wealth surplus should begin gifting now to maximize the probability of surviving the 7-year charge period
Every IHT plan needs a valid, up-to-date will as its foundation—identify clients without wills and recommend appropriate solutions based on estate complexity
Position yourself as the coordinator who understands the technical landscape and connects clients to specialists when needed—know your boundaries and build your referral network

Your clients trust you with their financial futures, and that trust extends to their families' inheritances. The advisers who confidently explain the 2027 pension changes, model gifting scenarios with actual numbers, and coordinate comprehensive estate strategies that align legal, financial, and tax planning—those are the advisers who build multi-generational client relationships.

This isn't just technical compliance. This is the care and expertise that defines exceptional financial advice.

For clients who need straightforward will protection without complex trusts or structures, recommend WUHLD's £49.99 online will service. Your clients complete a simple online process in 15 minutes, preview their will free before paying, and receive a legally valid UK will plus executor and inheritance tax guides. No subscriptions, no hidden fees, no appointments—just fast, affordable protection that ensures their IHT planning has the legal foundation it needs.

Frequently Asked Questions

Q: What is the current inheritance tax nil rate band in 2025?

A: The nil rate band is £325,000 per person, frozen at this level until 2030. The additional residence nil rate band is £175,000 when a main residence passes to direct descendants, also frozen until 2030. Combined, a married couple can potentially pass £1 million tax-free, though the RNRB tapers away for estates over £2 million.

Q: Will pensions be subject to inheritance tax from 2027?

A: Yes. From 6 April 2027, unused pension funds and death benefits will be included in the estate for IHT purposes. This applies to both defined contribution and defined benefit schemes. Death-in-service benefits and dependant scheme pensions from DB arrangements remain excluded. Personal representatives will be responsible for reporting and paying the IHT.

Q: How does the 7-year rule work for inheritance tax gifts?

A: Gifts become exempt from IHT if you survive seven years after making them (these are called potentially exempt transfers). If you die within seven years, the gift becomes chargeable. Taper relief reduces the tax liability for deaths occurring 3-7 years after the gift, but only if the total gifts exceed the £325,000 nil rate band. The relief reduces the tax amount, not the gift value.

Q: What are the changes to business relief from April 2026?

A: From 6 April 2026, 100% business relief is capped at £1 million for combined business and agricultural property. Assets exceeding this receive only 50% relief, creating an effective 20% IHT rate. AIM shares receive particularly harsh treatment with only 50% relief on the entire holding and no access to the £1 million allowance.

Q: How can leaving money to charity reduce inheritance tax?

A: If you leave at least 10% of your net estate (after nil rate band) to charity, the IHT rate reduces from 40% to 36% on the taxable portion. This creates a situation where the family's loss is often much smaller than the charitable benefit, particularly for estates significantly over the IHT threshold.

Q: When should financial advisers discuss inheritance tax planning with clients?

A: Raise IHT planning during annual reviews for clients over 55, at wealth accumulation milestones (inheritance received, business sale, significant property value increase), during major life events (marriage, divorce, retirement, children/grandchildren born), and when regulatory changes affect their situation—such as the 2025-2027 reforms.

Q: Do all estates need trusts for inheritance tax planning?

A: No. Trusts are useful for specific situations: vulnerable beneficiaries, control concerns, second marriages, business succession, or large estates with generational planning needs. Simple estates under £1 million with straightforward beneficiaries often achieve the same outcome through well-drafted wills plus strategic gifting, without trust complexity and costs.

Q: What happens to AIM shares under the new inheritance tax rules?

A: From 6 April 2026, AIM shares receive only 50% IHT relief instead of the previous 100%. This creates an effective 20% IHT rate on the entire holding. Critically, AIM shares do not benefit from the £1 million allowance that applies to other qualifying business assets—they receive 50% relief from the first pound.

Ready to Create Your Will?

WUHLD makes it simple to create a legally valid will online in just 15 minutes. Our guided process ensures your wishes are properly documented and your loved ones are protected.

Start creating your will now — it's quick, affordable, and backed by legal experts.

Legal Disclaimer: WUHLD's online will service is suitable for straightforward UK estates. Clients with complex assets, business interests, trusts, international property, or intricate family situations should consult a qualified solicitor. Financial advisers should use professional judgment in recommending appropriate will solutions based on individual client circumstances.

This article provides general information about inheritance tax planning strategies for financial advisers and does not constitute financial, legal, or tax advice. Rules and thresholds are correct as of October 2025 but may change. For complex estates or specific client situations, always recommend professional legal advice.

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