UK inheritance tax takes 40% of everything above the threshold. What your parents or grandparents built over a lifetime, and paid tax on along the way, is taxed a second time when they die.
Business owners are hit especially hard: anyone handing on a family business risks heirs who cannot pay the tax out of the running business and have to sell part of it. Since 6 April 2026, 100% business and agricultural property relief covers only the first £2.5 million; above that, the relief falls to 50%.
The thresholds are an illusion
Yes, there is a threshold: £325,000, rising to as much as £500,000 when your home goes to your children or grandchildren. It sounds generous. It is not, if you own a house in London or the South East. The threshold is quickly used up. And then the tax begins.
How to reduce inheritance tax legally
There are legal ways to cut inheritance tax considerably or avoid it altogether. Lifetime gifts, family foundations, holding structures abroad: all of these are tools that have to be put in place early. If you wait until the death has happened, you have no options left.
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