Inheritance Tax Planning Isn’t Just for the Mega-Rich (But You’ve Been Told It Is)
You’d be forgiven for thinking inheritance tax is a “rich people problem.”
It’s the kind of thing you imagine affecting old-money families with stately homes, vintage wine cellars, and a butler called Geoffrey.
But in reality? If you own a decent house in the South East and have a few investments, you’re probably already in the danger zone — you just don’t know it yet.
Let’s debunk the myth: inheritance tax is increasingly a middle-class problem.
💥 Why “Normal” People Are Getting Caught
Here’s the issue:
The IHT threshold (nil-rate band) is £325,000 — and has been frozen since Gordon Brown was still relevant.
Add the residence nil-rate band of £175,000, and a couple can pass on up to £1 million without tax — if they meet the criteria.
Anything over that is taxed at 40%. Yes, four-zero.
Now consider:
Average UK house price: £286,000
Average London house price: £515,000
Private pensions, life cover, savings, crypto, rental property?
Suddenly your “modest” estate looks a lot more taxable than you thought.
🧠 So, What Can You Actually Do?
Here’s where it gets interesting. You don’t need to be wealthy to use smart IHT strategies. You just need to start early and stop avoiding it like a will-writing workshop in your inbox.
Some genuinely helpful tactics:
✅ Use your allowances
Gift £3,000 each year (use last year’s too if you didn’t)
Gifts from income can be exempt if they don’t reduce your lifestyle
Small gifts and wedding gifts have their own limits
You can gift any amount away to a person and it will fall outside of your estate if you live for 7 years
✅ Life insurance held in trust
Want your beneficiaries to avoid panic-selling the family home to pay the IHT bill?
Get a whole of life policy to cover the liability — but put it in trust, or it’ll just make the tax bill bigger.
✅ Charitable giving
Give 10% or more of your net estate to charity, and your IHT rate drops from 40% to 36%.
Help others — help your tax bill. That’s as win-win as it gets.
Lets break that down looking at a case study:
Rob, a divorcee dies in June 2023 leaving an estate of £800,000 - we will assume there’s no residential property included.
£800,000 - £325,000 = £475,000
£475,000 * 40% = IHT of £190,000
£285,000 left to his beneficiaries
Now, lets assume Rob leaves 10% of his net estate to charity in his Will.
£800,000 - £325,000 = £475,000
£475,000 * 10% = £47,500 left to charity
As 10% is being left to charity, Rob qualifies for a reduce IHT rate of 36%
£475,000 * 36% = IHT of £171,000
£304,000 left to his beneficiaries
His chosen charity is £47,500 better off and his beneficiaries are also £19,000 better off.
📌 Final Thought
Inheritance tax isn’t just a problem for the elite — it’s a creeping cost on everyday families who’ve quietly built up value over time.
Start the conversations now. Plan smart. Use the reliefs available. Because HMRC doesn’t care that your wealth came from grit, sacrifice, and Aldi own-brand tea.
They’ll tax it all the same.
p.s. not advice obvs!
This article would be correct as at the time of writing but as we know; rules and regulations can change. Seek advice before taking any action.