Inheritance Tax (IHT) remains one of the biggest financial concerns for many of our clients at Cullen Wealth. The UK Inheritance Tax threshold (also known as the nil-rate band) has been frozen at £325,000 since 2009. With asset values continuing to rise, more families are finding themselves subject to Inheritance Tax than ever before. At a rate of 40% on assets above the available limits, wealth transfer between generations can be greatly affected.

At Cullen Wealth, we see Inheritance Tax planning as part of a complete financial strategy rather than a separate service. Our job is to help you identify potential risks and explore effective ways to reduce them. We can then implement tailored solutions to fit your financial goals and family situations.

The first step in any Inheritance Tax planning conversation is to gain a clear picture of any potential exposure. It’s often a surprise to discover that your estate might owe Inheritance Tax — particularly when you consider property, investments, and pensions together under the UK Inheritance Tax gifting rules and thresholds.

As financial planners, we take a comprehensive view of your financial situation, reviewing:

• • Property and other tangible assets
  • Cash savings
  • Investment portfolios
  • Business interests
  • Pension arrangements

While pensions currently fall outside the estate for Inheritance Tax purposes, potential changes from 2027 could alter this. We ensure you understand how different assets interact within the broader context of your wealth and how Inheritance Tax rules may evolve over time.

Where applicable, we also discuss allowances such as the residence nil rate band (RNRB), which can provide an additional threshold when passing your home to your children or grandchildren.

Our priority is always to ensure you maintain financial security and independence while planning effectively for Inheritance Tax mitigation. There’s little value in giving away assets to save tax if it compromises your lifestyle.

We use scenario modelling to help you keep enough cash, earn income, and feel secure. This ensures you can enjoy your wealth today while protecting your family’s future and minimising paying taxes unnecessarily.

Our Inheritance Tax planning is built around six core principles, designed to balance tax efficiency with financial security.

Through detailed cashflow planning, we work with you to detail your true spending capacity. This gives you the confidence to enjoy your wealth today, while managing future Inheritance Tax liabilities effectively.

Regular gifting from excess income remains one of the simplest, yet effective IHT tools. For instance, if you have extra income, making regular gifts can reduce the estate’s value right away. This works as long as the gifts do not affect your standard of living.

In the UK, Inheritance Tax gifting comes with many rules. As financial planners, we help ensure all gifts are properly documented so that they qualify for all relevant exemptions including:

• • The £3,000 annual exemption (which can be carried forward for one year)
  • Small gifts of up to £250 per person
  • Gifts to a spouse or civil partner, which are entirely exempt from IHT
  • Additional gift allowances in the year of somebody’s marriage
  • Potentially Exempt Transfers (PETs) and Chargeable Lifetime Transfers (CLTs), which become fully exempt after seven years – this is often referred to as the Inheritance Tax seven year rule

Trusts provide flexibility and protection, allowing you to control assets while taking them out of the estate. This is a vital part of understanding what Inheritance Tax is and how it applies. Trusts can also help manage when and how your children or grandchildren receive their inheritance.

A whole of life insurance policy written in trust can provide the funds needed to pay an Inheritance Tax bill. This ensures beneficiaries do not need to sell assets unexpectedly. We help determine suitable levels of cover and ensure the policy is structured so proceeds fall outside the estate, reducing the tax to pay on death.

For clients who can handle the risk, Business Relief (BR) (formerly known as Business Property Relief (BPR)) investments can provide up to 100% IHT relief. This relief is available after just two years and can include Alternative Investment Market (AIM) portfolios, which we consider only as part of a diversified, risk-aware strategy.

With proposed changes potentially bringing pension funds into IHT from April 2027, it’s vital to plan strategically. We can work with you to structure your pension assets, exploring ways to mitigate Inheritance Tax on a property and other key assets through comprehensive estate planning.

From April 2026, new Inheritance Tax rules will impact Business Relief (BR) and Agricultural Relief, introducing a £1 million allowance per individual. This change, part of the Rachel Reeves’ Inheritance Tax changes, marks a significant shift for business and landowners.

If you are affected by any of these new changes, we can work closely with you to:

• • Assess your current exposure under the new rules
  • Reorganise ownership structures to optimise use of the £1 million allowance
  • Explore alternative strategies such as succession planning, trust structures, and liquidity management
  • Coordinate with legal and accounting professionals to ensure that business continuity and family objectives remain aligned

For many clients, this change presents both challenges and opportunities. Our goal is to help you protect your business, keep your land, and pass on your legacy efficiently under the new rules.

Charitable donations remain a strategic way to reduce Inheritance Tax liability while supporting important causes. It can ensure your wealth makes a real difference both now and later.

Gifts to registered charities are exempt from IHT, whether made during your lifetime or through your will.

In addition, leaving 10% or more of your estate to charity can reduce your IHT rate from 40% to 36%, making it a meaningful way to both avoid Inheritance Tax and create a lasting impact.

We can work with you closely to:

• • Identify suitable charitable giving strategies that align with your values
  • Structure lifetime gifts and legacies for maximum tax efficiency
  • Ensure donations are properly documented and coordinated with your wider estate plan

Early planning is key when tackling IHT. The ‘Inheritance Tax seven year rule’ means you have more options if you begin planning sooner – resulting in a greater peace of mind.

By gifting sooner, you can benefit from greater flexibility and reduced estate values over time, making the most of your personal exemptions.

However, we also understand that life changes. Regular reviews ensure strategies stay relevant as asset values, family situations, or tax legislation evolve.

With ongoing discussions around Rachel Reeves’ Inheritance Tax changes, staying informed and adaptable is essential. We closely monitor developments to ensure you always understand how changes could affect your financial plans, including the residence nil rate band and allowances for a spouse or civil partner.

Effective IHT planning often requires collaboration which is why we work closely with lawyers, accountants, and other experts. This helps us make sure everything – from wills and trusts to tax calculations – fits into a cohesive, effective plan.

If you’re concerned about your potential IHT liability, the first step is understanding your current position.

Our team at Cullen Wealth can help you:

• • Assess your exposure to Inheritance Tax
  • Identify suitable mitigation strategies
  • Implement solutions that protect your wealth for future generations

IHT planning isn’t about avoidance – it’s about clarity, control, and confidence. Let us help you preserve your legacy while maintaining financial security today.

Get in touch with us today to arrange a confidential discussion about your Inheritance Tax planning.