The allowances every estate starts with
Each person has a nil rate band of £325,000. On top of that, a residence nil rate band of up to £175,000 is available when your home, or your share of it, passes to your children or grandchildren. Anything above the allowances is taxed at 40%.
Married couples and civil partners can pass any unused allowance to the survivor, and anything left to a husband, wife or civil partner is normally free of inheritance tax. So a couple who leave their home to their children can often pass on up to £1 million between them before tax is due. The residence nil rate band is reduced for estates worth more than £2 million, and leaving at least 10% of the net estate to charity can lower the rate on some assets to 36%.
Why more Hertfordshire families are affected
Inheritance tax used to be something only very wealthy families thought about. That has changed for a lot of households around Watford. The allowances have not risen for years while house prices have, and a family home near Cassiobury Park or in Bushey, plus savings and a pension, can now take an estate past the limits.
Many people only find out when they are dealing with a parent's estate. Getting inheritance tax advice while you are alive gives you far more options.
What is included
- Estate review and inheritance tax estimate
- Use of nil rate and residence nil rate bands
- Gifting plans and records of gifts
- Pension and inheritance tax review
- Business and agricultural relief checks
- Working with your solicitor on wills and trusts
- Inheritance tax figures for executors
- Final income tax and estate returns
Inheritance tax advice in Watford on lifetime gifts
Gifts are the most common planning tool, and some are exempt straight away. Others become exempt if you live for seven years after making them.
If you die within seven years and your gifts in that period add up to more than the nil rate band, tax can be charged on them. Taper relief reduces the rate for gifts made between three and seven years before death. Be careful with gifts where you keep a benefit. If you give your house to your children but carry on living in it rent free, HMRC treats it as still yours.
- Up to £3,000 a year in total, with any unused amount carried forward one year
- Small gifts of up to £250 per person each tax year
- Wedding gifts of up to £5,000 to a child or £2,500 to a grandchild
- Regular gifts from your income that leave your usual standard of living intact
Business owners, farms and pensions
Business Property Relief and Agricultural Property Relief have long protected family businesses and farms. From 6/4/2026 full relief is capped, and value above the cap gets relief at a lower rate. Owners of companies based around Watford, and farming families elsewhere in Hertfordshire, should check whether their succession plans still work.
From 6/4/2027 most unused pension funds and death benefits will count as part of the estate for inheritance tax. For many people asking us for inheritance tax advice this is the biggest change of all, because a pension was often the asset they planned to leave untouched. We look at how this affects your overall figures and whether the order in which you draw on savings and pensions should change.
Building a plan that works for your family
We start by listing what you own, what it is worth and who you want it to go to. From there we work out the likely tax bill today and set out the options, with the trade offs explained plainly. Giving money away early saves tax, but only if you can afford to live without it.
Where a new will or a trust is part of the answer, we work with your solicitor so the tax side and the legal side match. Inheritance tax advice is not a one off exercise. Plans need a review every few years, or sooner after a sale, a death in the family or a change in the rules.
Support for executors and families
If you are acting as an executor, the first deadline is usually the inheritance tax payment. It is due by the end of the sixth month after the month of death, and interest runs after that. Tax on property can often be paid in yearly instalments, which helps when the house has not yet sold.
We help value the estate, prepare the figures for the inheritance tax return and deal with HMRC. We also prepare the final income tax return for the person who died and any returns for income the estate earns while it is being sorted out. If the house is sold later for more than its probate value, capital gains tax may apply to the increase, and we cover that too.
Who this suits
- Homeowners whose estate may pass the allowances
- Retired couples planning gifts to children
- Owners of family companies and farms
- People with large pension savings
- Executors dealing with a parent's estate
Common questions
We live in Bushey and our estate is about £1 million. Will our children pay inheritance tax?
Possibly not. A married couple who leave their home to their children can usually pass on up to £1 million between them using both nil rate bands and both residence nil rate bands. The answer depends on how the estate is split, any gifts made in the last seven years and pension values after 6/4/2027.
How much can I give my grandchildren each year without tax?
You can give up to £250 each to as many people as you like, plus £3,000 a year in total under the annual exemption. You cannot use both for the same person in the same year. Larger gifts are fine too, they just need you to live seven years to be fully free of tax.
Can I pay my grandson's school fees from my income?
Regular gifts from income can be exempt with no set limit, as long as you can afford them after your usual living costs. Keep records of your income and spending, because executors may need to show this later.
Who pays the inheritance tax, the executors or the family?
The executor pays it from the estate's funds before anything is handed out. People who received gifts may have to pay tax only if the person who died gave away more than £325,000 in the seven years before death.
Will my pension pot be taxed when I die?
From 6/4/2027 most unused pension funds and death benefits will be included in the estate for inheritance tax. If you have been leaving your pension untouched to pass on, it is worth reviewing your plans now.
Can I use the residence allowance if I leave my home to my nephew?
No. The residence nil rate band only applies when your home passes to direct descendants, such as children, stepchildren or grandchildren. A nephew or niece does not count, although your normal £325,000 nil rate band still applies.
Do gifts to charity reduce inheritance tax?
Gifts to charity are free of inheritance tax. If you leave at least 10% of your net estate to charity, the rate on some of the rest can fall from 40% to 36%.
Do I need a solicitor as well as an accountant?
Wills and trusts need a solicitor, and many families also use one for probate. We handle the tax figures and planning, and we are happy to work with your existing solicitor or one you choose.