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This 20-step checklist covers the exemptions, will provisions, trusts, insurance and reliefs that make up the IHT picture, and the changes dated 2026 and 2027. It was written for the 2025/26 tax year. That year ended on 5 April 2026, so the BPR, APR and AIM changes it describes as forthcoming have since taken effect; the pension change has not yet. Each step says where things now stand.
The 2025/26 tax year ended on 5 April 2026. The £2.5m allowance for 100% BPR and APR, and the drop of AIM shares to 50% BPR, are both in force. Anything below framed as something to do "before April 2026" describes a window that has closed. Each step links to a full guide with the detail.
Add up all assets: property (at market value), savings, investments, ISAs, pension funds (from April 2027 these will be included), business interests, and personal possessions. Deduct debts and mortgage balances. This is the "gross estate" for IHT purposes.
Use our IHT calculator as a quick estimate.
The nil-rate band is £325,000 and has been since 2009. A surviving spouse or civil partner may also have a transferred nil-rate band from their late partner, of up to 100% of £325,000 on top. The residence nil-rate band is £175,000 per person where a qualifying home passes to direct descendants, tapering away by £1 for every £2 of net estate above £2m — see our guide to the RNRB.
You can give away £3,000 per year free of IHT. If unused in the previous year, carry it forward for one year — giving £6,000 this year. A couple can each use their allowance: potentially £12,000 immediately exempt. See gifting strategy 2025/26.
The normal expenditure out of income exemption has no cash cap and takes a gift out of the estate immediately rather than after seven years. It has three conditions, all of which must be met: the gifts form part of a regular pattern, they come out of income rather than capital, and the donor is left with enough income to maintain their usual standard of living. Executors have to demonstrate all three on form IHT403, which is why contemporaneous records of income and outgoings matter. See our full guide to normal expenditure out of income.
A potentially exempt transfer falls out of the estate entirely once the donor has survived it by seven years. Taper relief is often misunderstood: it reduces the tax charged on the gift, not the value of the gift, and it only bites where the gifts made in the seven years before death exceed the available nil-rate band. Below that threshold there is no tax to taper. A gift where the donor keeps a benefit is not a PET at all — see our guide to gifts with reservation of benefit.
Wedding gifts are immediately exempt: up to £5,000 from a parent, £2,500 from a grandparent or more remote ancestor, £2,500 from one party of the marriage or civil partnership to the other, and £1,000 from anyone else. The gift has to be made on or shortly before the marriage, and the marriage has to go ahead. Small gifts of up to £250 per person per tax year are also immediately exempt, but the small gifts exemption cannot be used for someone who has already received part of the £3,000 annual exemption from you in the same year.
Keep a record of every gift made — date, recipient, amount, and the exemption or reason it qualifies. Executors will need this for the IHT400 form at death, and HMRC may require supporting evidence.
A will written before the Autumn Budget 2025 pre-dates both the £2.5m BPR/APR allowance (6 April 2026) and the pension IHT change (6 April 2027). The provisions those changes interact with are:
See our guide to how to write a will in the UK.
Leaving 10% or more of the baseline amount to a qualifying charity reduces the rate from 40% to 36%. The baseline amount is not the whole estate: it is the value of a component of the estate after deducting exemptions, reliefs and the available nil-rate band, and the test is applied component by component. Whether the family is better off depends on where the estate sits relative to that threshold — see the worked examples in the guide to charitable legacy to reduce IHT to 36%.
If you co-own property, check whether you are joint tenants or tenants in common. For large estates, tenants in common gives more IHT planning flexibility — the first spouse can direct their share under their will. See our guide to IHT on jointly owned property.
This step was written before the change took effect. Since 6 April 2026 a £2.5m allowance applies to the combined value of property qualifying for 100% BPR or 100% APR, and 50% relief applies to the value above it. The allowance was announced at £1m at the Autumn Budget on 26 November 2025 and raised to £2.5m by the government on 23 December 2025. The points that follow from it:
See our guides to BPR changes April 2026 and APR changes April 2026.
Since 6 April 2026, shares admitted to trading on a recognised stock exchange but designated "not listed" — which is how AIM shares are treated — attract 50% BPR in all circumstances rather than 100%. Because they never qualify for 100% relief, they do not draw on the £2.5m allowance. See AIM shares and IHT relief changes.
Unspent defined contribution pension funds fall into the taxable estate from 6 April 2027. Death in service benefits from a registered scheme and dependants' scheme pensions are out of scope, and the spouse and charity exemptions still apply. Personal representatives report and pay the tax; the government dropped its original proposal to put that on scheme administrators on 21 July 2025. HMRC estimates around 10,500 estates will become liable that would not otherwise have been, and around 38,500 will pay more. See pensions and IHT from April 2027.
Nominations direct who receives a pension on death. From 6 April 2027 a nomination to a spouse or civil partner still falls within the spouse exemption, while one to a child or grandchild brings the fund into the IHT calculation — and, where the member died at 75 or over, the beneficiary also pays income tax on what they draw.
Where a life policy is not written in trust and pays into the estate, the payout is part of the estate for IHT and can be taxed at 40%. A policy held on trust pays to the trustees instead and is outside the estate. Insurers generally provide their own trust deeds for this. See our guide to life insurance in trust.
A whole-of-life policy written in trust pays a lump sum on death that the family can use to settle the IHT bill, without the payout itself being part of the estate. The premiums are a transfer of value each time, though they will often be covered by the normal expenditure out of income exemption where they are paid from surplus income.
A transfer into a discretionary trust is a chargeable lifetime transfer. There is no 20% entry charge where the amount settled is within the nil-rate band still available after cumulating the settlor's chargeable transfers of the previous seven years — so it is not simply £325,000 in every case. The settled value leaves the estate only if the settlor survives seven years, and it stays in their cumulative total for those seven years, reducing the nil-rate band available for anything else. Trust property is then subject to ten-year and exit charges at a maximum of 6% of the value above the trust's available nil-rate band. A settlor who can benefit from the trust has made a gift with reservation, and the property stays in their estate regardless. See our guide to IHT on discretionary trusts.
A gift where the donor keeps a benefit stays in the estate however long ago it was made. The common examples are giving away a home and continuing to live in it rent-free, trust arrangements where the settlor can still benefit, and business property where income rights are retained. See our guide to gifts with reservation of benefit and the pre-owned asset charge.
If you were born outside the UK or hold non-UK domicile status, check whether you have now become a long-term UK resident under the April 2025 rules. See our guides to non-dom IHT reforms 2025 and IHT for non-UK domiciles: the new rules.
Farra publishes information, not advice, and nothing on this page is a recommendation about a particular estate. Where a step needs someone acting for you: will and trust drafting is done by solicitors and licensed will writers, insurance and pension work by FCA-regulated financial advisers, and business and agricultural property valuations and reliefs by tax advisers. What any of that costs varies widely and no official body publishes a benchmark figure for it, so this page does not quote one.
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