Strategic Gifting to Reduce IHT | Friend & Grant Accountants

Strategic Gifting to Reduce Inheritance Tax

A couple in their 70s approached us for inheritance tax (IHT) planning.

Their estate totalled £2.7 million, pushing it above the £2 million threshold for the Residence Nil Rate Band (RNRB).

This meant there was a potential IHT liability on second death of £820,000.

The Challenge

The clients wanted to minimise IHT without unnecessarily tying up assets.

Timing and estate thresholds were critical, as exceeding £2 million would start to reduce the ability to claim the RNRB.

Gifting to reduce IHT

We advised the couple to make lifetime gifts totalling £700,000, bringing the estate below the critical £2 million “sweet spot” and maximising available reliefs.

The 7-year gifting rule applies, meaning these gifts are excluded from the estate for IHT purposes if the clients survive seven years.
Even if the clients passed away shortly after the gifts were made (e.g, gifting on Monday, passing on Friday), the estate would still save £140,000 in IHT.
Surviving the full 7-year period would increase the total IHT saving to £420,000.

The Result

Immediate IHT saving: £140,000
Potential long-term IHT saving: £420,000
Strategic estate planning: Assets positioned efficiently, minimising unnecessary tax liability

Key Takeaway

Thoughtful gifting, aligned with estate thresholds, can significantly reduce IHT exposure, providing immediate and long-term benefits for families.

Even small strategic steps can make a big difference in protecting family wealth.

Getting in touch

Inheritance tax planning is a useful tool in many different scenarios with the potential for huge tax savings on your estate.

If you would like to speak to us about our Inheritance Tax Planning Service, please call us on 01634 731390 or take the next step and request a call back and we will be in touch to discuss your enquiry further.