Make A Will
This is the most basic, but often most neglected, form of estate planning. Without a will, your estate will be distributed according to set rules, meaning a larger portion may go to the taxman.
Gift assets during your lifetime. People have an annual £3,000 tax-free gift allowance, known as the annual exemption. If you haven't used your annual exemption fully in the previous year, you can combine it with the current year's allowance. The money is immediately outside of your estate so there will be no IHT to pay.
People can also give up to £250 each year to however many people they wish (but only one gift per recipient per year), make a wedding gift, or leave 10% or more of your net estate to a charity, which may enable you to qualify for a reduced IHT rate of 36%.
As long as you live for at least seven years after giving money away, there is no limit on how much you can give completely IHT free.
Use your UK Pension
Pensions, including those in drawdown, are free from IHT and can be passed on tax efficiently. It may be worth looking at using other forms of income in retirement.
Set Up A Trust
Trusts have traditionally been a staple of estate planning, and can be very effective at reducing the estate's value and therefore the potential IHT charge. It's important to note that assets placed in trusts will only fall outside of an estate for IHT purposes if they live for at least seven years after establishing the trust. The related taxes and laws are complicated, however, and any decision a client makes may be irreversible.
Invest In Companies Qualifying For Business Property Relief (BPR)
Anyone that owns or invests in a business that qualifies for BPR for at least two years can benefit from full IHT relief. You must still be a shareholder on death though.
Invest In AIM shares
An increasingly popular but still vastly underused way is by investing in certain AIM-listed companies which qualify for BPR. You must must hold the shares for at least two years; after which they could potentially pass on assets to whomever they wish without a penny due in inheritance tax.