Is Inheritance Tax Something You Should Worry About?

Belgravia Capital
May 31
3 min read

“Inheritance tax” – it’s a phrase that can instantly raise questions, concerns, and confusion.

Whether you’re preparing your estate or expecting to inherit from a loved one, you’ve likely asked yourself: Are inheritance taxes something I need to worry about?

In this guide, we at Belgravia Capital Wealth Management explain what inheritance tax is, when it applies, how much it could cost, and how you can plan to minimise its impact.

What Are Inheritance Taxes?

Inheritance Tax (IHT) in the UK is a tax on the estate - that is, the total property, money, and possessions - of someone who has died.

It’s not a tax on the beneficiary (the person receiving the inheritance), but rather on the estate itself before assets are passed on.

When Do You Pay Inheritance Tax?

Inheritance tax is only paid if the value of the estate exceeds the tax-free threshold, also known as the nil-rate band.

For 2025, this threshold is:

£325,000 per individual, plus,
an additional £175,000 residence nil-rate band if the deceased leaves their main residence to a direct descendant (child, grandchild, etc.)

That means an individual can pass on up to £500,000 tax-free, or £1 million for married couples or civil partners when combining allowances.

How Much Is Inheritance Tax?

If an estate exceeds the thresholds mentioned above, the standard rate of Inheritance Tax is 40%, charged on the portion of the estate above the threshold.

A simple example, of a single mother with an estate of £800,000, leaving her main residence to her children:

Estate value: £800,000
Tax-free allowance: £500,000
Taxable estate: £300,000
IHT bill: £120,000 (40% of £300,000)

However, this is the “headline” figure — and most estates don’t end up paying that much, thanks to various reliefs and exemptions.

Who Pays Inheritance Tax?

The executor of the will or the administrator of the estate is responsible for calculating and paying the tax using the estate’s funds before distributing the remaining assets to beneficiaries.

In some cases - for example, if someone gave large gifts shortly before death - the recipient of the gift may be liable to pay some or all of the IHT due.

What’s Included in an Estate for IHT purposes?

Inheritance tax is assessed on the total value of everything the deceased owned, including:-

Property (primary home, rental, or holiday properties)
Cash and bank savings
Investments (stocks, bonds, ISAs)
Vehicles
Jewellery, art, or antiques
Business interests
Gifts made in the 7 years before death (in some cases)

Can Inheritance Tax Be Avoided or Reduced?

Yes - with proper planning, Inheritance Tax can often be reduced significantly or avoided entirely.

Here are some of the main strategies:

Use your gifting allowances - give away up to £3,000 per year tax-free.
Pass assets to a spouse or civil partner - completely exempt from IHT.
Leave money to charity - reduces your estate’s taxable value and may lower the IHT rate to 36%.
Utilise trusts - these can remove assets from your estate, although rules are complex.
Take out life insurance - if written in trust, a policy can cover the IHT bill without increasing the estate’s value.

Who Is Exempt from Inheritance Tax?

Some recipients or estates are fully or partially exempt, such as:

Spouses or civil partners- Charities- Gifts made more than 7 years before death
Business and agricultural assets, if they qualify for relief

Understanding your eligibility for exemptions is a critical part of estate planning.

Is Inheritance Tax Fair?

This is a point of ongoing political debate. Supporters argue that IHT helps redistribute wealth; critics say it’s a “double tax” on already-taxed income and assets.

What’s certain is that the rules are subject to regular scrutiny and potential reform.

For now, however, the tax remains in place - and planning around it is essential for families who want to preserve wealth for future generations.

How Belgravia Capital Wealth Management Can Help with IHT planning

Our team at Belgravia Capital specialises in helping clients:

Understand their IHT exposure
Structure their estates efficiently
Use allowances, trusts, and insurance to mitigate tax
Navigate intergenerational wealth transfer

Our advice is always tailored, strategic, and designed to protect what matters most.

So, are Inheritance Taxes Something to Worry About?

If your estate is valued under the current thresholds - maybe not.

But if you own property, investments, or have long-term wealth goals, it’s wise to take action now.

Inheritance tax is a manageable liability when approached with professional guidance and timely planning.

To find out more about your exposure and the right solutions for your family: