Inheritance Tax in 2025: Planning Strategies While Rates Remain Unchanged

Published by RJP LLP – Chartered Certified Accountants and Tax Advisers

Despite ongoing rumours of reform or abolition, Inheritance Tax (IHT) rules remain unchanged in 2025. While the standard 40% rate still applies, many families are being drawn into the IHT net due to frozen thresholds and rising asset values — especially property.

At RJP LLP, we help individuals and business owners across the South East create practical and proactive IHT strategies to protect family wealth. Here’s what you should know — and how to act now, while current rules still apply.

IHT Rates and Thresholds in 2025

There have been no changes to IHT rates or allowances in 2025, but thresholds remain frozen until at least 2028.

Threshold Amount

Nil-rate band (NRB) £325,000
Residence nil-rate band (RNRB)* £175,000
IHT rate on death estate above threshold 40%

*The RNRB applies when passing a main residence to direct descendants and where the total value of the estate is less than £2m.
As property prices and investment portfolios rise, more estates are creeping above these limits — creating unexpected IHT bills for families.

What Can You Do Now? Planning Strategies to Use While You Can

1. Make Lifetime Gifts

Gifting during your lifetime remains one of the most effective ways to reduce IHT. The key rules:
• Annual exemption: £3,000 per person, per tax year (plus carry forward for one year)
• Small gifts: £250 per recipient, per year
• Wedding gifts: £1,000 to £5,000 depending on relationship
• Potentially Exempt Transfers (PETs) to individuals: larger gifts that fall outside your estate if you survive 7 years

RJP Tip: Start a regular gifting strategy to make use of annual exemptions before they’re potentially reformed.

2. Use the ‘Gifts Out of Surplus Income’ Exemption

If you have income that exceeds your living expenses, you can gift the excess regularly and it falls outside your estate immediately, without having to wait 7 years. This is one of the most underused IHT reliefs — but you must keep accurate records.
We help clients document this correctly to ensure HMRC accepts the exemption.

If you’re searching for more information on gifting in the context of IHT then we have a specific article.

3. Make Use of Trusts

Trusts remain useful tools for:
• Managing wealth across generations
• Protecting assets within the family
• Reducing IHT if structured correctly
Trusts are lifetime gifts rather than PETs and are subject to periodic and exit charges, so expert advice is crucial to ensure they’re appropriate for your goals.

4. Leverage Business Property Relief (BPR)

If you own a qualifying business or shares in a personally owned trading company, you may be eligible for 100% IHT relief on those assets — through Business Property Relief (BPR). Although this relief was severely curtailed in the 2024 Budget, it is still valuable if assets are structured correctly.

Own business assets? We can advise on how to preserve and maximise BPR eligibility.

We also have an in-depth article on BPR and inheritance tax available.

5. Review Your Will and Estate Plan

Even if you’ve already done some IHT planning, it’s important to review your Will regularly. Life changes (such as marriage, divorce, children, or new assets) may make it out of date.

Also review:
• Whether your estate is structured to maximise the RNRB and BPR
• If your executors/trustees are still appropriate
• Opportunities to create flexible Will trusts

What Might Change in the Future?

IHT is politically sensitive, and while many call for reform — or even abolition — the tax brings in over £7 billion annually.

Possible future changes could include:
• Removal or reduction of BPR or RNRB
• Restrictions on gifting or trust exemptions
• Alignment of lifetime and death tax rates
Acting now under known rules is often safer than waiting for change.

RJP LLP Can Help You Plan Effectively

At RJP LLP, our team of tax advisers can help you:

• Assess your current IHT exposure
• Maximise reliefs
• Build a long-term strategy to reduce tax
• Set up trusts, lifetime gifts or business succession plans
• Ensure compliance with HMRC’s requirements

Contact us via partners@rjp.co.uk to book a confidential estate planning review

Preserve more of your wealth for your family — not the taxman. Let RJP LLP help you plan with clarity and confidence.

RJP LLP are Chartered Certified Accountants and Tax Advisers working with families, business owners and high-net-worth individuals across London and the South East.