Written by Daniel Andrews, Partner & Solicitor, Cramp & Mullaney LLP
Last reviewed: April 2026
Inheritance tax is one of those subjects that many families assume does not apply to them, only to discover when dealing with an estate that it does. The rise in property values over recent decades has brought a significant number of estates within the scope of inheritance tax that might not have been affected a generation ago. Understanding the basic rules is an important part of estate planning, whatever the size of your estate.
When Does Inheritance Tax Apply?
Inheritance tax is charged on the estate of a person who has died if the total value of the estate exceeds the available nil rate band. The standard nil rate band is currently £325,000. This is the amount that can pass free of inheritance tax. Everything above this threshold is taxed at 40 per cent, subject to available exemptions and reliefs.
There is an additional allowance, the residence nil rate band, of up to £175,000, which is available where a residential property that has at some point been the deceased’s main residence is left to direct descendants, including children, grandchildren, and stepchildren. This brings the combined potential nil rate band for an individual to £500,000. Where one spouse or civil partner has died without using their nil rate band, it can be transferred to the surviving spouse, potentially giving a combined nil rate band of up to £1 million for a couple’s estate.
Exemptions and Reliefs
Certain transfers are exempt from inheritance tax entirely. Transfers between spouses and civil partners, whether during lifetime or on death, are generally exempt from inheritance tax as long as both parties are domiciled in the United Kingdom. Gifts to charities are also exempt. Annual gifts of up to £3,000 per year can be made free of inheritance tax, as can gifts of up to £250 to any number of individuals. Larger gifts made during the deceased’s lifetime may also escape inheritance tax if the donor survives for seven years after making the gift, under the potentially exempt transfer rules.
Business property relief and agricultural property relief can reduce or eliminate inheritance tax on qualifying business or agricultural assets. These reliefs are complex and their availability depends on the nature of the assets and how they have been used. Professional advice is essential where these reliefs may be relevant.
Planning to Reduce Inheritance Tax
There are a number of legitimate planning strategies that can reduce an inheritance tax liability. Making use of annual gift allowances over time can reduce the value of an estate gradually. Lifetime transfers into trust can remove assets from the estate, subject to the seven-year rule. Ensuring that a will is structured to make full use of nil rate bands and available reliefs is a basic starting point. Taking out life insurance written in trust to meet an anticipated inheritance tax liability can provide funds to pay the tax without requiring assets to be sold.
Inheritance tax planning is most effective when it is done well in advance. Last-minute planning is rarely as effective as a considered long-term strategy, and some planning steps require time to achieve their intended effect. If you have not reviewed your estate planning recently, or if your circumstances have changed significantly, it is worth taking advice sooner rather than later.
Our lifetime planning team at Cramp and Mullaney advises individuals and families across East Sussex on inheritance tax planning as part of a comprehensive estate planning service. We offer a fixed fee initial consultation.
If you would like advice on making a will, lasting power of attorney, or any aspect of estate planning in East Sussex, Cramp & Mullaney LLP would be happy to help. We advise individuals and families across Eastbourne, Battle, Hastings, Bexhill, Lewes and the surrounding area from our offices at The White House, 97 South Street, Eastbourne, East Sussex, BN21 4LR and 42A High Street, Battle, East Sussex, TN33 0EA. Call our Eastbourne office on 01323 720581 or Battle on 01424 533222. We offer a fixed fee 30-minute initial consultation.
This article is for general information only and does not constitute legal advice. The law in this area can be complex and the right approach will depend on your individual circumstances. If you need specific advice, please contact Cramp & Mullaney LLP on 01323 720581 (Eastbourne) or 01424 533222 (Battle), or email info@cmlaw.co.uk. We are authorised and regulated by the Solicitors Regulation Authority (SRA No. 598851).
