Inheritance tax and family planning

40% on the value of the estate above the available nil-rate bands, reduced to 36% if at least 10% of the net estate is left to charity. A rental portfolio is valued at market value less the mortgages secured on it. Because let property rarely qualifies for Business Relief, a portfolio is usually taxed in full, which is why landlords with large estates plan earlier than most.

Whenever something significant changes: buying or selling properties, moving properties into a company, marriage, divorce, a death in the family, or a change in the tax rules, such as pensions coming into the estate from April 2027. Otherwise, a review every few years is sensible. Wills that refer to specific properties or out-of-date structures are a common source of problems.

They help at the edges. The £3,000 annual exemption, with one year's carry forward, small gifts of £250 per person and wedding gifts are useful for cash gifts but small compared with property values. The more powerful exemption for landlords is for regular gifts out of surplus income, which can move significant sums from rental income without waiting seven years, if the conditions are met and recorded.

Yes. The £3,000 annual exemption, and last year's unused exemption, can be set against the value of any gift, including a property or a share of one. On a large gift, it only reduces the value slightly. It doesn't affect capital gains tax, which is charged on the full market value of the property given away.

Usually, yes. Where a parent gives property or shares to their unmarried child under 18, income from it of more than £100 a year is taxed as the parent's income. So gifts to young children rarely save income tax while they're minors, although they can still move future growth out of the parent's estate. Gifts from grandparents are treated differently.

It's commonly recommended. A life policy written in trust can pay out directly to the beneficiaries, usually more quickly than through probate, and the aim is for the payout to be outside your estate. For landlords, that money can meet an inheritance tax bill so properties don't have to be sold quickly. The policy itself is a regulated product, so take advice from a regulated adviser.

The trustees, in most cases. Trustees of discretionary trusts pay income tax on rental income at the trust rate, which rises to 47% on property income from 2027/28. Section 24 also applies to trustees, so mortgage interest relief is restricted. Beneficiaries who receive income from the trust may be able to reclaim some tax, depending on their own rates.

Relevant property trusts pay an inheritance tax charge on each tenth anniversary of their creation, at a maximum effective rate of 6% of the value above the available nil-rate band. A proportionate exit charge, also up to 6%, applies when property leaves the trust between anniversaries. These charges are worked out on the trust's history and need careful calculation and valuation.

Possibly, on most of its value. A trading company can qualify for Business Relief even if it holds some investments, provided its business isn't wholly or mainly investment. But assets not used in the trade over the previous two years, such as let property, are excepted assets and are left out of the relief. So investment property in a trading company is usually taxed in full.

Generally no. A transfer to a beneficiary under a will, by an assent or appropriation, is exempt from SDLT, unless the beneficiary gives other consideration besides taking on the secured debt. That is one reason why property passing on death can be simpler than a lifetime gift of a mortgaged property, which can attract SDLT on the debt taken over.

Yes, and it can be simpler. You pay capital gains tax on the sale, as on any sale, and the cash gift is a potentially exempt transfer. Giving cash avoids SDLT on mortgage debt, avoids your children taking on Section 24 on a loan, and lets them decide how to use the money. The trade-off is that you pay CGT now and lose the property's future growth.