15th February 2024

Inheritance Tax Planning: Is Inheritance Tax in the near future likely to remain a threat to the goal of passing your estate on as intact as possible to your heirs?

Francis Fukuyama in his 1992 book “The end of history…” postulated that Western liberal democracy as a statement for government, underpinned by capitalism, represented the final perfection of government and social economic systems. This is the afterglow of their seeming victory, when viewed against the collapse of the alternative Soviet bloc style of government and their command economies in the late 1980s.

We all know how that turned out, with the rise of various authoritarian regimes around the world and the economic shocks over the last 20 years.

Do we risk such an ‘eye off the ball’ moment ourselves when it comes t0 Inheritance Tax, in light of the now increasingly publicised suggestion that the Conservative Government is considering to cut in the rate of Inheritance Tax from the current 40% to a lower rate, of perhaps 30%? Especially when their opposition counterparts refused to be drawn on whether a future Labour Government would reverse such a measure, which is seen as such a political lethal touchstone.

Arguably we do.

As we look into the near future, the amount of Inheritance Tax paid may continue to increase as a result of more estates falling  into Inheritance Tax payment territory. However, the decrease will occur in the average amount of Inheritance Tax paid for the average tax paying estate.


Here is a hypothetical example:

Mr and Mrs Smith have assets that are likely to be subject to Inheritance Tax, amounting to £2.5 million. With inflation as it is now, they do not feel particularly healthy notwithstanding that in actual terms they are ‘well off’.

They carry out no Inheritance Tax planning during their lifetime. Mr Smith dies first and his wife dies later on, leaving her estate to their two adult children.

Currently, she only has two Nil Rate Band Allowances available to her i.e. £650,000. That is because by reason of the size of her estate, her beneficiaries are not entitled to a Residential Nil Rate Band allowance (in this case a further £350,000 worth of shelter from Inheritance Tax). The overall taxable estate here is £1.85 million. That is taxed at 40%. This gives rise to an Inheritance Tax bill of £740,000, and one ends up with a situation that each of the two children receive £880,000 after the effects of that tax bill.

Moving to a 30% rate would see, in the same factual circumstances, the tax bill reducing t0 £550,000 – a reduction of Inheritance Tax of £190,000. This is an increase to each child from £880,000 to £975,000.

Clients with this level of wealth (or more) should give thought to Inheritance Tax planning measure they could take, notwithstanding any rate cut.

For those families with significantly less valuable estates to pass on, will not be issued with this due to their estates valuing less than £1 million. There is still concern as to the protection of the non-survivor’s likely estate, from the effects of the survivor’s long-term care cost. With suitable financial planning, it can be ensured that a good level of income or ‘pseudo-income’ is secured to be able to afford long-term care without recourse to the encasement of capital assets.


Your solicitor and financial advisor remain a key partnership for these clients, as well as for those who are wealthier.

For advice in both instances, please contact Edward Walter at ewalter@bussmurton.co.uk or call our office at 01892 520 222.

Edward Walter

Edward Walter