Inheritance tax: 'The one effective strategy' which can save you tens of thousands off your bill

Man doing taxes and HMRC letter

More families are being caught in the inheritance tax net because the threshold has been frozen since 2009

Temi Laleye

By Temi Laleye

Published: 06/07/2024

- 05:00

More families are being caught in the inheritance tax net because the threshold has been frozen since 2009

When it comes to cutting one's inheritance tax bill, there is "one effective strategy" that can help them save tens of thousands of pounds.

An expert has shared his top tips to making the tax process less stressful and expensive.

HM Revenue & Customs pocketed about £700million from inheritance tax last month, this is an increase of £85million from last April.

While only four per cent of estates paid inheritance tax, the most recent figures show, the proportion of deaths resulting in inheritance tax is estimated to grow to over seven per cent by 2032/33.

The average bill could increase to £243,000 in the 2023/24 tax year, with more than 31,000 families having to hand over part of their inheritance to the taxman, Wealth Club calculations suggest.

There are ways families can reduce losing thousands to the tax man if they take time to carefully tax plan, and gift away assets.

HMRC logo outside the tax department buildingThe current standard inheritance tax rate is 40 per centPA Media

Married couples and civil partners can leave everything to each other tax-free. They can also inherit any unused inheritance tax allowance from their partner, meaning a couple can pass on up to £1million between them.

Finn Wheatley, a financial expert spoke with GB News to offer some tips based on the latest rules to help make the taxation process less stressful and expensive.

He explained that when it comes to reducing tax obligations, gift-giving is one approach he often discusses. Parcelling things out provides real opportunities for lowering future liability.

He said: "When it comes to passing your money and property down to future generations, inheritance tax is one of those complicated subjects that lots of folks don't fully understand.

"One effective strategy is gifting to your spouse while you're both still kicking. Anything you give to your wife or husband is inheritance tax-free, which can save you tens of thousands over the years. Just be sure to tell the tax man within two years so your spouse can use up any leftover allowance when the time comes.

"Giving some of your possessions to the kids early on also removes value from your estate over time. But you need to be careful - the tax folks will only for sure wave the taxes if you live for seven years afterward. If not, there may be fees based on how long ago the gifts were made.

"Whether spreading gifts over many years from regular income amounts excluded due to relatively low value, or larger lump sums spaced out to take advantage of exclusions over the seven-year period, this can help cut your bill."

Britons can give away up to £3,000 each tax year tax-free, to one person or split between many, and any unused annual exemption can be carried forward to the next tax year.

Gifts include money, household and personal goods such as jewellery or furniture, land, London-listed shares and unlisted shares held for less than two years before death.

People can give regular tax-free gifts out of their surplus income. Surplus income is what is left after all someone's living costs have been covered.

There is no limit to the amount, as long as it does not affect their standard of living.


Couple at laptop

People can give regular tax-free gifts out of their surplus income.


This can include setting up a regular standing order directly into the recipient’s bank account, setting up a life insurance or pension plan for someone, or paying into a Junior Isa.

Individuals can also give up to £5,000 to their child, £2,500 to their grandchild or £1,000 to any other person for their wedding or civil partnership.

Timing is key as people can give unlimited amounts away but typically these take seven years to be completely inheritance tax-free.

Wheatley concluded: "Establishing trusts also has merits, though as always with legal vehicles, expert guidance is a must to ensure proper structure and application."

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