Inheritance Tax  

How to manage inheritance tax liabilities and property

  • Describe how people can mitigate a big IHT bill
  • Describe the importance of financial planning
  • List the ways in which gifting can be a liability
How to manage inheritance tax liabilities and property

The property market gets a lot of attention and makes a lot of headlines – which is hardly surprising, given that of all the asset classes it is the one that clients will be tangibly aware of every single night they sleep under their own roof.

How often have advisers heard clients say, 'My house is my pension', or 'My house is my main investment', leaving that uneasy feeling that clients are too dependent on a single asset class and perhaps not aware enough of the reasons to diversify.

On a similar vein of thinking, property may too often be misidentified as the primary or sole cause of increased inheritance tax bills.

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After all, property has now been allocated its own nil rate band – perhaps an appealing headline, but somewhat concealing the additional layer of complexity it brought with it. But digging a little deeper into the data on IHT suggests that it not just house price inflation that has been pushing up IHT bills in recent years.

Starting with the headline figures, it has already been widely reported that IHT receipts have been increasing steadily, from £2.7bn in the 2010-11 tax year to a record £5.2bn in 2017-18. 

Of this, £201m – less than 4 per cent of the total – consisted of transfers to or charges on discretionary trusts.

In April 2017, the residential nil rate band was introduced to “reduce the burden of IHT for most families by making it easier to pass on the family home to direct descendants without a tax charge”. 

A breakdown of assets and liabilities listed on IHT returns is available, most recently for the 2015-16 tax year. 

Looking at the totals for men and women of all ages, net movable property, including securities, cash, insurance, loans and other assets minus otherdebts and funeral expenses, accounted for a total of £38.2bn.

Net immovable property, including UK residential property, other buildings and land minus mortgages, accounted for a total of £41.6bn – giving a 48 per cent/52 per cent split between the two.

In other words, almost half of IHT was charged on assets that were not property.

In the 75 to 84 age group, 50,400 estates included UK residential buildings, with a total value of £10.9bn. But a larger number of estates – 68,600 – listed cash, with a lower total value of £4.97bn.

Looking at female deaths in isolation, cash assets more than doubled in each age band, with those aged over 85 holding a total of £7.22bn in cash (see table one).

In total, £8.15bn was held in cash by women who had been widowed.

Table one. IHT: Women

Estimates of cash assets passed on death in 2015-16


Age band



Under 45

45 to 64

65 to 74

75 to 84

85 and over


Total widowed

Number of deaths 








Cash assets (£m)








For men, the increase in cash holdings through each age band was not as large in percentage terms, but the monetary values are still large, with a total of £9.45bn held in cash.

Interestingly, the numbers of married – as opposed to widowed – men holding securities and insurance policies dwarf the number of women holding them – 21,600 to 8,770 for securities and 11,800 to 4,450 for insurance policies.