Planning Your Legacy: How the government will take an (even bigger) slice of your pension fund

We know from our experience working with clients over decades that inheritance tax (IHT) is an issue that many people have strong feelings about. The idea that money you’ve accumulated over your lifetime on which taxes have already been paid could be raided by the government is not one that sits well with people, given the basic human desire to help your family and pass wealth down to the next generations.

We’ve also found in talking to our clients that, even though they may not actually be liable for IHT on their own estates, they nevertheless feel that this is an unjust and punitive tax. When we’ve run seminars and briefings for our clients, it’s the subject that generates the most interest.

So any government ramping up the IHT bill to even higher levels does so at significant risk to their popularity. That didn’t stop Chancellor Rachel Reeves doing just that in her Autumn Budget on 30^th October. As a result we’ll be reviewing our clients potential tax liability and considering actions that might be appropriate to their future planning, and we’ll address these at your next Progress Meeting.

If you’re not one of our clients already, and you’re just starting to think about inheritance or reviewing plans you already have, understanding the latest guidance can help you make the best choices for your family and your wealth. The recent changes in the Budget make this a great moment to get clear on what inheritance could mean for you, and how our Financial Plan process can help cover every essential aspect, step by step. Here’s a guide to the key points.

 

What’s Inheritance Tax (IHT) Going to Cost You—and How Can You Minimise It?

Inheritance Tax can take a significant slice of your estate if your planning isn’t up-to-date. IHT is currently 40% for estates above a certain threshold—£325,000 for individuals and £650,000 for couples.

In addition, if you own your home and intend to leave your wealth to your family, you may also qualify for Main Residence Relief which increases these allowances by up to £175,000 each, meaning that up to £1 million may be tax free for a couple. The rules around this Relief are quite complex and we can give you full details on request. There’s an explanation on the government website that you can find here.

There are strategies to help reduce the impact of IHT on your estate:

• Maximise Allowances: Knowing about exemptions like the Residence Nil Rate Band (which can increase your IHT-free threshold by up to £175,000 if your home passes to direct descendants) could mean substantial savings.
• Support Causes You Love: Gifts left to charity reduce your IHT rate from 40% to 36%, which may let you leave a positive legacy while also reducing your estate’s tax burden.
• Make regular gifts: There are annual tax-free gift allowances available, and if you have surplus income you can make regular gifts that could be immediately free of IHT.
• Investing in IHT-free assets: there are a range of investments that qualify for exemption from IHT, whilst at the same time offering full access to your money and attractive growth potential.
• Using Trusts: Passing money into a trust can be an effective way to reduce your tax liability, and can offer immediate IHT savings.
• Creating a Family Investment Company – for people with significant wealth, an FIC could be a solution that you should consider. We have all of the details and plenty of experience in this area, so please contact us if you want to know more.

These are just some of the possible ways to reduce your Inheritance Tax liability. Fortunately, with our Financial Plan process you don’t have to work out these numbers on your own. We assess how your estate could be affected by IHT and pinpoint which allowances and strategies are best for your situation, making sure your wealth is protected in the most efficient way.

 

Pass on Wealth Smoothly—and On Your Terms

Inheritance planning gives you the control to pass on wealth in a way that suits your family and your goals. Structured planning can provide security for future generations while letting you enjoy the benefits of your assets now.

• Structured giving can lower the taxable value of your estate, allowing you to share wealth with your family while simplifying future tax matters.
• Trusts can protect assets while offering flexibility for how they’re managed. This is especially helpful for families with specific needs or for larger estates. Our accounting team at Chesterton House Accounting Services and legal team at Woolley, Beardsleys & Bosworth are highly proficient in Trusts and we can work closely with them to make sure everything is set up for your individual situation.
• Reliefs for Business Owners: Business Property Relief can reduce the IHT on family-owned businesses, so planning for this now could be key to protecting what you’ve built.

 

Ensure Family Harmony by Planning Ahead

It’s natural to want your loved ones to benefit from your estate without the stress of navigating complex financial arrangements. Part of inheritance planning is about reducing future conflicts and ensuring that your wishes are respected. As specialists in protecting family wealth over generations, there are some key points to consider.

• Have Open Discussions: Talking with your family about your intentions can prevent misunderstandings. Our Financial Plan process includes discussions on the family’s goals and needs so that everyone is on the same page. Where appropriate, we’ll recommend bringing family members into the conversation to ensure that they are informed and ready to act when the time comes.
• Review Your Will Regularly: An up-to-date will is essential. Without one, inheritance can be left to legal default, which might not align with your preferences. Having a clear, updated will ensures your wishes are followed.
• Appoint Power of Attorney: Designating trusted people to manage finances or healthcare decisions if needed can help preserve your control and ease stress for family members.
• Our Financial Plan considers all these aspects, from family dynamics to the finer details of Wills and Powers of Attorney, so that you don’t miss any important step in ensuring family harmony and security. We can work with our team at Woolley, Beardsleys & Bosworth, or your existing solicitor, to ensure your Will is tailored to you and your specific circumstances.

 

How Our Financial Plan Can Help You Protect Your Legacy

Inheritance planning can feel daunting, but with our Financial Plan process, you’re not alone. We take the time to understand your goals, your family situation, and your financial landscape, so you have a plan that not only protects your wealth but makes sure it benefits your family in a thoughtful, streamlined way.

By partnering with our team, you’ll have access to the guidance and tools that simplify every aspect of inheritance planning, so you can be confident in your legacy. We’re here to provide clarity and practical solutions, ensuring a smooth journey through what can often be complex terrain.

 

Taking the First Step

Planning for inheritance now means peace of mind for you and your loved ones. With our support and personalised Financial Plan process, you can be sure your legacy will be passed on in the most effective way possible. Get in touch with us to discuss how we can help make your vision for your family’s future a reality.