16/09/2026
Inheritance tax is not compulsory. It is a voluntary tax in the sense that a number of long-standing, entirely legal reliefs exist to reduce or remove it, and most people never use them simply because nobody walked them through the options.
The starting point is gifting. You can give away £3,000 per tax year, immediately exempt, plus unlimited small gifts of £250 to any number of people. Beyond that, larger gifts become Potentially Exempt Transfers: survive seven years from the date of the gift, and it falls outside your estate entirely. Die within seven years, and taper relief reduces the tax owed the longer you survived.
A less well-known relief covers gifts made from surplus income, not capital. If you can show a gift was made from regular income, left you with enough to maintain your normal standard of living, and formed part of a consistent pattern, it can be exempt immediately, with no seven-year wait at all.
A structure worth knowing about is the non-UK pension trust, such as a QNUPS. Assets held inside the wrapper can benefit from gross roll-up, meaning investment growth isn't reduced by UK income tax or capital gains tax while it stays inside the trust. Structured correctly, the assets can also sit outside your estate for IHT purposes. This suits expats consolidating pension or investment assets outside the UK system, though the qualifying conditions are specific and worth checking properly before assuming they apply to you.
Some people take a different approach entirely: insure against the bill rather than avoid it. A whole-of-life policy, written in trust so the payout itself sits outside your estate, can be set up to pay out enough to cover the eventual IHT liability, so your family isn't forced to sell property or investments quickly to settle it. This doesn't reduce the tax owed, and premiums rise with age and health, so it can become an expensive option later in life. It suits people who would rather guarantee the cash is there than restructure assets now.
Spousal exemption remains one of the most powerful reliefs available: transfers between UK-domiciled spouses or civil partners are unlimited and immediate.
For expats specifically, domicile status still matters here, separate from the residency rules that now govern income and gains. Many long-term expats assume they have left UK inheritance tax behind. Some have. Many have not.
None of these reliefs work retroactively, and most require the paperwork and timing to be right from the outset. If this is a concern for you — thirty minutes. Free. No pitch. Just the facts.
