Does Making a Will Avoid Inheritance Tax? The Truth About Wills and Estate Planning

Many people believe that writing a will will protect their family from inheritance tax (IHT).

It’s one of the most common assumptions we hear from clients:

“If I’ve made a will, I won’t need to worry about inheritance tax — right?”

Unfortunately, that’s not true. A will is essential for ensuring your assets go to the right people, but it does not automatically reduce or eliminate your inheritance tax liability.

At Belgravia Capital Wealth Management, we help families across the UK understand the difference between writing a will and creating a comprehensive inheritance tax strategy.

In this article, we explain what a will does, and doesn’t do, when it comes to IHT, and how you can structure both your will and your estate to reduce your tax bill.

What Does a Will Do?

A legally valid will is the cornerstone of any estate plan. It allows you to:

• Specify who should inherit what

• Appoint guardians for children

• Name executors to manage your estate

• Outline any funeral wishes

• Distribute personal possessions

If you die without a will (intestate), the government decides who inherits and it may not be who you would have chosen.

So a will is absolutely vital for making sure your loved ones are looked after. But when it comes to inheritance tax, a will alone is not enough.

What Doesn’t a Will Do?

A will does not:

• Reduce the value of your estate

• Increase your tax-free allowance

• Protect you from the 40% IHT rate

• Avoid HMRC scrutiny

In fact, your will could increase your inheritance tax bill if not written with tax planning in mind - for example, by leaving all your assets to your children instead of using your spouse’s exemption.

What Is Inheritance Tax — and Who Pays It?

Inheritance tax is charged at 40% on the value of your estate above certain allowances:

• Nil-Rate Band: £325,000

• Residence Nil-Rate Band: £175,000 (if passing your home to children or grandchildren)

• Transferable Allowances: Spouses can pass unused allowances to each other, allowing married couples or civil partners to leave up to £1 million tax-free

The tax is paid by your estate, not the beneficiary, before your assets are distributed.

Does a Will Avoid Inheritance Tax? No — But It Can Help Reduce It If Structured Properly

While a basic will doesn’t eliminate tax, a well-structured will that incorporates estate planning principles can significantly reduce or even eliminate IHT.

Here’s how:

1. Use of Spousal Exemption in the Will

Leaving your entire estate to your spouse or civil partner is IHT-free. But more importantly:

• Your unused allowances (NRB and RNRB) transfer to them

• This creates a combined £1 million threshold for the surviving spouse’s estate

If your will does not explicitly leave assets to your spouse or is poorly structured, you may lose this benefit.

2. Will Trusts to Control Wealth and Reduce Tax Exposure

Incorporating discretionary trusts or life interest trusts into your will can:

• Provide for beneficiaries who are vulnerable, financially immature, or going through divorce

• Shield assets from passing fully into their estates (and being taxed again)

• Allow your estate to benefit from controlled distributions, rather than lump sums

These trusts can also help limit exposure to future IHT, although recent reforms have narrowed some advantages.

3. Charitable Giving in Your Will

Leaving 10% or more of your estate to charity reduces the IHT rate on the rest from 40% to 36%.

You can also make specific gifts to registered charities tax-free, which lowers your taxable estate value.

4. Including Specific Gifting Instructions

Your will can coordinate with lifetime gifting strategies, for example:

• Recognising previous gifts made under the 7-year rule

• Coordinating with trusts created during your lifetime

• Avoiding double-taxation of gifts already removed from your estate

5. Maximising Use of Allowances

Wills that consider both spouses’ ownership of property and assets can:

• Ensure both NRB and RNRB are fully utilised

• Avoid assets “skipping” a generation without tax planning (e.g. directly to grandchildren)

• Prevent tapering of the RNRB for estates over £2 million by careful asset division

Real-World Example: Two Wills, Two Outcomes

Mr and Mrs Ellis each had an estate worth £800,000. Mr Ellis died first.

• In Scenario 1, Mr Ellis left everything to his children in his will. As he used his nil-rate band and residence nil-rate band, his wife had no transferable allowance.

  When Mrs Ellis died, her estate faced a £200,000 tax bill.

• In Scenario 2, Mr Ellis left everything to his wife. No tax was due on his death, and his unused allowances were transferred.

  When Mrs Ellis died, the couple’s combined estate passed on £1 million tax-free with no IHT bill at all.

The difference? Thoughtful will drafting and proper use of exemptions.

What Your Will Can’t Do Without Additional Planning

Even with a well-written will, inheritance tax planning should include:

• Trust structures

• Gifting strategies

• Insurance policies in trust

• Business and agricultural relief planning

• Pension structuring (especially from 2027 onward)

A will is just one tool. The full estate planning toolkit is what protects your family wealth long term.

What Happens If You Don’t Make a Will?

If you die intestate:

• Your estate is divided according to statutory rules, not your wishes

• Your spouse doesn’t automatically inherit everything

• You lose the ability to structure your estate tax-efficiently

• Unmarried partners and stepchildren may receive nothing

• The estate may pay more tax than necessary

In short: no will = less control and potentially higher inheritance tax.

How Belgravia Capital Wealth Management Can Help with Wills and Inheritance Tax planning

We work with families to:

• Draft tax-efficient wills in collaboration with legal partners

• Use trusts and gifting to reduce estate size and tax exposure

• Set up insurance solutions to cover potential IHT liabilities

• Ensure full use of both spouses’ allowances

• Review estates annually to adapt to new tax legislation

Our goal is simple: pass on more of your wealth with less going to HMRC.

Conclusion: Does Making a Will Avoid Inheritance Tax?

No, not by itself. But when structured correctly and combined with professional estate planning, your will can play a key role in reducing or eliminating inheritance tax altogether.

Don’t leave your estate’s future to chance, or HMRC.

Contact us today at contact@belgravia-capital.co.uk to create a tax-efficient will and estate plan that protects your wealth and your family.