Inheritance tax (IHT) and succession planning can seem daunting, especially when you hold assets across borders, run a trading business or own a property portfolio.
Be proactive, not reactive. Just as with investing, the earlier you plan, the more options you open up—and the less your beneficiaries will pay in tax and legal fees down the line.
When undertaking your own inheritance and succession planning, please consider these key practical aspects:
Inheritance Tax Basics (IHTA 1984)
- Nil-rate band: £325,000 per person (frozen until at least 2030).
- Residence nil-rate band (RNRB): up to £175,000 if you leave your home to direct descendants.
- Rate on excess: 40% (36% if 10% or more left to charity).
Business Property Relief (BPR)
- 100% relief on qualifying trading businesses after two years’ ownership (but from 6 April 2026, the full 100% relief from inheritance tax will be restricted to the first £1 million of combined agricultural and business property).
- 50% relief on some shares and securities (e.g. unlisted AIM companies).
- Loss of relief if you hold non-trading (investment) activities (Note – buy to let property investments would fit into this category).
Agricultural Property Relief (APR)
- 100% relief on farmland and certain farm buildings. From 6 April 2026, the full 100% relief from inheritance tax will be restricted to the first £1 million of combined agricultural and business property.
Multiple-jurisdiction Assets
- UK IHT based on domicile – foreign assets used to fall outside the scope if you were non-domiciled, but this has changed post 6 April 2025 so that all worldwide assets will be included if you are UK tax resident even if you are not UK domiciled.
- Double-tax treaties are limited for IHT (no global network like for income tax).
- You may need separate Wills and local probate (e.g. France, Spain).
Trading Business vs Property Portfolio
- A trading business often qualifies for BPR, potentially avoiding IHT altogether.
- A pure residential property portfolio does not qualify; IHT on value can be crippling.
- Consider liquidity: property is illiquid—your estate may need to sell to pay IHT.
Integrating Retirement and Succession Planning
Understanding the full inheritance tax and succession planning story can be complicated. We recommend clients think of their retirement planning and inheritance as one process or journey, taking into consideration the following steps…
1. Know your “retirement number”
Calculate the capital you need to generate your desired annual income without eroding capital excessively.
2. Build your assets in an income-generating way (depending on your individual profile)
For example: Use pensions (tax relief and growth outside IHT planning), ISAs and dividend-yielding shares.
3. Understand IHT and succession planning
For example:
- Use trusts for excess capital if you’re comfortable with the complexities (IHT charge on ten-year anniversaries)
- Make lifetime gifts up to £3,000 per year and exploit small gift exemptions £250 per person
4. Have valid Wills where your assets lie
- UK Will for UK-situated assets and separate Wills for each foreign jurisdiction
- Ensure they work in harmony to avoid intestacy in one country
5. Plan your liquidity and IHT journey
For example:
- Life assurance “written in trust” to cover an anticipated IHT bill
- Consider post-death cashflows: capital call facilities, sale-and-leaseback of property
For example: Sarah, a UK resident entrepreneur, plans retirement at 65. She owns:
- A UK limited company trading in bespoke furniture (expecting sale proceeds of £1 million)
- A UK buy-to-let portfolio worth £800,000
- A holiday home in Spain valued at €500,000
Without planning, the combined IHT exposure at 40% could exceed £960,000 (ignoring reliefs).
Her potential steps could be:
- Transfer majority of her company shares into a trust—BPR locks in 100% relief after two years.
- Make £3,000 annual gifts to each of her three children plus occasional £5,000 lump sum gifts—crystallising exemptions.
- Take out a life policy in trust, designed to pay approximately £500,000 on death, matching her IHT liability.
- Draft separate Wills for the UK and Spain.
Outcome: Her trustees settle tax on due dates using the policy proceeds and reduced estate value, her beneficiaries inherit the company seamlessly, and Spain administers local succession under her Spanish Will.
How SAIL International Can Help
At SAIL we help with:
- Coordination of retirement-number projections with IHT modelling
- Advise on the interplay of UK rules and foreign assets
- With our partners, help arrange for the drafting of multi-jurisdictional Will packages and trust documentation
- Structure business shareholdings to maximise BPR and minimise IHT
- Recommend and help you implement life assurance trusts for liquidity
Inheritance tax and succession planning are not “set-and-forget.” The rules change, asset values rise, and family circumstances evolve. Early, integrated planning—including retirement targets, tax reliefs, Will reviews and liquidity strategies—saves tax, time and stress.
If you leave it until “too late,” your family may face forced sales, hefty tax bills and legal wrangles.
Book a call with us here for a tailored review and implementation plan.
Indemnity
This article is for general guidance only and does not constitute professional advice. Individual circumstances vary. SAIL International does not warrant any specific outcome and readers act at their own risk.