Can an inheritance tax accountant assist with claiming reliefs and exemptions in the UK?

Understanding Inheritance Tax in the UK and the Role of an Accountant

Inheritance Tax (IHT) in the UK can be a complex and daunting subject for many taxpayers, especially those with estates that may exceed the tax-free thresholds. For UK taxpayers and business owners, understanding whether an inheritance tax accountant in the uk can assist with claiming reliefs and exemptions is crucial to managing potential tax liabilities effectively. In this first part, we’ll explore the basics of IHT, the latest statistics and figures, the types of reliefs and exemptions available, and why an accountant might be your best ally in navigating this intricate landscape.

What Is Inheritance Tax in the UK?

Inheritance Tax is a tax levied on the estate of someone who has passed away, typically applied when the estate’s value exceeds the tax-free threshold, known as the nil-rate band (NRB). As of February 2025, the standard nil-rate band remains at £325,000, a figure that has been frozen since 2009 and is set to remain so until at least 2028, according to HM Revenue & Customs (HMRC) updates. Additionally, there’s the residence nil-rate band (RNRB), which can increase the threshold to £500,000 if you leave your main home to direct descendants (children or grandchildren).

The standard IHT rate is 40% on the portion of the estate above the threshold, though this can drop to 36% if 10% or more of the estate is left to charity. However, not all estates are liable for IHT—HMRC statistics for 2021-22 (the latest detailed data available as of early 2025) show that only around 4% of estates paid IHT, with approximately 27,800 estates liable out of over 600,000 deaths annually. Despite this, forecasts by the Institute for Fiscal Studies (IFS) suggest this figure could rise to 7% by 2032 due to frozen thresholds and rising asset values.

Key IHT Statistics and Figures for 2025

To understand the relevance of hiring an inheritance tax accountant, let’s look at some updated figures:

• Total IHT Receipts: In the 2023-24 tax year, IHT receipts reached £7.5 billion, a 4% increase from £7.2 billion in 2022-23, reflecting rising property and asset values (HMRC data, February 2025).

• Average IHT Bill: For estates paying IHT in 2021-22, the average tax bill was around £215,000, according to HMRC’s Inheritance Tax statistics.

• Reliefs and Exemptions Claimed: In 2020-21, Agricultural Property Relief (APR) and Business Property Relief (BPR) alone cost the Exchequer £1.1 billion, with 1,300 estates claiming APR (average relief of £800,000 per estate) and 3,380 claiming BPR (average relief of £950,000 per estate), as reported by the IFS.

• Recent Changes: From April 2026, APR and BPR will be capped at £1 million at 100% relief, with a 50% relief rate (effectively 20% tax) on qualifying assets above this threshold, according to the Autumn Budget 2024 announcements on GOV.UK. This change aims to raise an estimated £520 million annually by 2028-29.

These figures highlight the significant financial stakes involved and the potential savings through reliefs and exemptions, underscoring the value of expert advice.

Common IHT Reliefs and Exemptions in the UK

Several reliefs and exemptions can reduce or eliminate IHT liability. Here are the most notable ones as of early 2025:

1. Spousal Exemption: Assets passed to a spouse or civil partner are exempt from IHT, provided they are UK-domiciled. This exemption allows couples to effectively double their nil-rate band to £650,000 (or up to £1 million with RNRB) when the second partner passes away.

2. Annual Exemption: You can give away £3,000 per tax year without it counting towards your estate for IHT purposes. Unused amounts can be carried forward one year, allowing up to £6,000 in a single year.

3. Small Gifts Exemption: Gifts of up to £250 per person per year are exempt, and you can give to as many people as you like under this rule.

4. Business Property Relief (BPR): Qualifying business assets (e.g., shares in an unquoted company or a business you own) can receive 50% or 100% relief, depending on the asset type. From April 2026, this relief will be capped as mentioned earlier.

5. Agricultural Property Relief (APR): Similar to BPR, APR offers up to 100% relief on agricultural land or property used for farming, also subject to the upcoming cap.

6. Charitable Donations: Gifts to charities are exempt, and leaving 10% or more of your estate to charity reduces the IHT rate on the taxable portion to 36%.

7. Seven-Year Rule: Gifts made more than seven years before death are generally exempt from IHT. If death occurs within seven years, taper relief may apply, reducing the tax rate progressively (e.g., 32% if given 3-4 years before death).

These reliefs and exemptions can significantly reduce IHT liability, but they come with specific conditions and complexities that often require professional expertise to navigate.

Why You Might Need an Inheritance Tax Accountant

Given the complexity of IHT rules, an inheritance tax accountant can play a pivotal role in ensuring you claim all available reliefs and exemptions. Here’s how they can assist:

• Expert Knowledge of Tax Laws: Accountants stay updated on the latest IHT legislation, including recent changes like the APR/BPR cap and the inclusion of inherited pensions in IHT calculations from April 2027 (per Autumn Budget 2024). This expertise ensures compliance and maximizes savings.

• Accurate Valuation of Estates: Valuing an estate accurately is crucial for determining IHT liability. Accountants can coordinate with valuers to assess assets like property, businesses, or investments, ensuring HMRC accepts the figures without dispute.

• Identifying Eligible Reliefs: Many taxpayers miss out on reliefs like BPR or APR because they don’t meet the specific criteria or fail to document them correctly. An accountant can identify eligibility and prepare the necessary paperwork.

For example, consider Mr. Thompson, a farmer in Yorkshire with a £2.5 million estate, primarily farmland. Without professional help, his family might face a hefty IHT bill upon his passing. An accountant could ensure he qualifies for APR on the agricultural value of his land and advise on restructuring ownership to maximize reliefs before the 2026 cap takes effect.

How an Inheritance Tax Accountant Helps Claim Reliefs and Exemptions

Navigating the maze of Inheritance Tax (IHT) reliefs and exemptions in the UK requires more than just a basic understanding of tax rules—it demands strategic planning, precise documentation, and an eye for detail. In this second part, we’ll delve into the specific ways an inheritance tax accountant can assist UK taxpayers and business owners in claiming reliefs and exemptions, supported by real-life examples and a recent case study. We’ll also explore the common pitfalls that individuals face when attempting to handle IHT on their own and how professional expertise can make a significant difference.

Strategies Employed by Inheritance Tax Accountants

An inheritance tax accountant doesn’t just fill out forms—they act as a strategic partner in minimizing your tax liability while ensuring compliance with HM Revenue & Customs (HMRC) regulations. Here are some key strategies they use to claim reliefs and exemptions effectively:

• Maximizing the Use of Nil-Rate Bands: Every individual has a £325,000 nil-rate band (NRB) as of February 2025, and couples can effectively double this to £650,000 by transferring unused allowances to the surviving spouse or civil partner. Additionally, the residence nil-rate band (RNRB) adds up to £175,000 per person (so £350,000 for a couple) if you leave your main home to direct descendants. An accountant ensures these allowances are fully utilized, often advising on estate planning years in advance to optimize transfers.

• Leveraging Lifetime Gifts: Gifts made during your lifetime can reduce your taxable estate, but they come with strict rules, like the seven-year rule, where gifts may still be taxable if you die within seven years of making them. Accountants can guide you on using the annual exemption (£3,000 per year, with the ability to carry forward one year’s unused allowance) and small gifts exemption (£250 per person per year) to systematically reduce your estate’s value over time.

• Applying Business and Agricultural Reliefs: Business Property Relief (BPR) and Agricultural Property Relief (APR) can reduce the taxable value of qualifying assets by 50% or 100%, depending on the circumstances. However, from April 2026, these reliefs will be capped at £1 million at 100% relief, with a 50% relief rate (effectively a 20% tax rate) on qualifying assets above this threshold, as per the Autumn Budget 2024 announcements. An accountant can assess whether your business or farmland qualifies and help restructure ownership or operations to meet the criteria before the cap takes effect.

• Charitable Giving for Tax Benefits: Leaving 10% or more of your estate to charity not only exempts those donations from IHT but also reduces the tax rate on the remaining estate from 40% to 36%. Accountants can calculate the optimal amount to donate to achieve this reduction, ensuring your estate benefits while supporting causes you care about.

• Trust Planning and Documentation: Trusts can be a powerful tool for managing IHT, but they come with complex rules, especially around discretionary trusts or interest-in-possession trusts. Accountants work alongside solicitors to set up trusts that qualify for exemptions or reliefs, such as those used for APR or BPR, and ensure proper documentation to avoid HMRC disputes.

Real-Life Example: The Importance of Professional Guidance

Consider Mrs. Patel, a 70-year-old widow in Birmingham with an estate valued at £1.2 million, including her home and a small family business. Initially unaware of the RNRB, she assumed her entire estate above the £325,000 NRB would be taxed at 40%. After consulting an inheritance tax accountant, she learned she could claim the RNRB of £175,000 (since her home was being left to her children), increasing her tax-free allowance to £500,000. Additionally, her accountant identified that her business qualified for 100% BPR on its £400,000 value, effectively removing it from the taxable estate. By restructuring her will and making small annual gifts within the £3,000 exemption, her taxable estate dropped significantly, saving her family over £200,000 in IHT.

This example illustrates how an accountant’s expertise in identifying and applying reliefs can lead to substantial savings—savings that might have been missed without professional help.

Recent Case Study: A Farming Family’s Battle with APR Changes

In late 2024, the Smith family, who run a dairy farm in Devon valued at £1.8 million, faced uncertainty after the Autumn Budget announced changes to APR. Historically, their farm qualified for 100% APR, meaning no IHT would be due upon the death of the current owner, Mr. Smith Sr. However, with the new £1 million cap on 100% relief starting in April 2026, they realized that £800,000 of their farm’s value would be subject to a 20% tax rate (after 50% relief), equating to a £160,000 tax bill.

Engaged an Inheritance Tax Accountant

They engaged an inheritance tax accountant who took immediate action. First, the accountant advised Mr. Smith Sr. to transfer part of the farm’s ownership to his children now, utilizing the seven-year rule to potentially exempt the gift from IHT if he survives until 2031. Second, they restructured the farm’s operations to ensure all assets met APR criteria, such as ensuring land was actively farmed rather than leased out, which could disqualify it from relief. Finally, the accountant recommended setting up a trust for a portion of the farm’s value to spread the tax liability over time, taking advantage of the 10-year interest-free payment option offered by HMRC for certain IHT liabilities.

By acting proactively, the Smith family reduced their potential tax burden and gained peace of mind, demonstrating how an accountant’s foresight can mitigate the impact of legislative changes.

Common Pitfalls Without Professional Help

Attempting to navigate IHT reliefs and exemptions without an accountant often leads to costly mistakes. Some common pitfalls include:

• Misvaluing Assets: Under- or overvaluing assets like property or businesses can trigger HMRC investigations or missed relief opportunities. Accountants ensure accurate valuations that withstand scrutiny.

• Missing Deadlines: Some reliefs, like those tied to lifetime gifts or trust setups, have strict timing requirements. Missing these can result in unnecessary tax bills.

• Failing to Document Properly: Claiming BPR or APR requires detailed evidence of business or agricultural use. Without proper records, HMRC may deny the relief, as they did in a 2023 case where a landowner’s claim was rejected due to inadequate proof of farming activity.

An inheritance tax accountant helps avoid these pitfalls by providing expertise, ensuring compliance, and advocating on your behalf if HMRC raises questions.

The Financial Impact of Expert Assistance

The cost of hiring an accountant often pales in comparison to the potential tax savings. For instance, with IHT receipts reaching £7.5 billion in 2023-24 (a 4% rise from the previous year, per HMRC data), and the average tax bill for liable estates around £215,000 (2021-22 data), the stakes are high. An accountant’s fees, typically ranging from £1,000 to £5,000 for complex estates, can save families tens or even hundreds of thousands in tax—making it a worthwhile investment.

Long-Term Planning and Adapting to Legislative Changes with an Inheritance Tax Accountant

Inheritance Tax (IHT) planning is not a one-off task—it’s a long-term strategy that requires foresight, adaptability, and a deep understanding of evolving tax laws. In this third part, we’ll explore how an inheritance tax accountant can assist UK taxpayers and business owners with long-term planning to maximize reliefs and exemptions, adapt to recent legislative changes, and ensure your estate is protected for future generations. We’ll also provide insights into emerging trends in IHT and how accountants stay ahead of the curve to safeguard your financial legacy.

The Importance of Long-Term IHT Planning

Effective IHT planning often starts decades before an estate is passed on, as many reliefs and exemptions—like the seven-year rule for gifts or eligibility for Business Property Relief (BPR)—require time to implement properly. An inheritance tax accountant plays a crucial role in crafting a strategy that aligns with your financial goals while minimizing tax liability. Here’s how they approach long-term planning:

• Early Gifting Strategies: One of the simplest ways to reduce your estate’s taxable value is through lifetime gifts. An accountant can create a gifting plan that leverages the annual exemption (£3,000 per year, with the option to carry forward one year’s unused allowance) and small gifts exemption (£250 per person per year). For larger gifts, they ensure you understand the seven-year rule and taper relief, which reduces the tax rate on gifts if you die within three to seven years of making them (e.g., 32% if given 3-4 years before death).

• Trust Structures for Future Generations: Trusts can be an effective way to manage how assets are distributed while reducing IHT liability. For example, discretionary trusts allow you to retain some control over assets while removing them from your estate for IHT purposes after seven years. Accountants work with solicitors to set up trusts that qualify for exemptions, such as those tied to charitable giving or APR, and ensure compliance with HMRC’s rules on trust taxation.

• Maximizing Spousal and Residence Nil-Rate Bands: The spousal exemption allows unlimited transfers between spouses or civil partners without IHT, effectively doubling the nil-rate band (NRB) to £650,000 for couples (£325,000 each) as of February 2025. The residence nil-rate band (RNRB) adds up to £175,000 per person (£350,000 for couples) if you leave your main home to direct descendants. An accountant ensures these allowances are fully utilized, often advising on how to structure your will to avoid unintentional tax traps, such as leaving assets in a way that disqualifies the RNRB.

Adapting to Recent Legislative Changes

The IHT landscape in the UK is constantly evolving, and recent changes announced in the Autumn Budget 2024 (as per GOV.UK updates) have significant implications for reliefs and exemptions. An inheritance tax accountant helps you adapt to these changes proactively. Here are some key updates as of early 2025 and how accountants address them:

• APR and BPR Caps from April 2026: Agricultural Property Relief (APR) and Business Property Relief (BPR) will be capped at £1 million at 100% relief, with a 50% relief rate (effectively a 20% tax rate) on qualifying assets above this threshold. For estates heavily reliant on these reliefs—like farms or family businesses—this could mean a substantial tax bill. Accountants are advising clients to act before April 2026, such as transferring assets now under the seven-year rule or restructuring business ownership to diversify relief eligibility.

• Inclusion of Pensions in IHT from April 2027: Starting April 2027, most inherited pensions will be included in the taxable estate for IHT purposes, reversing a previous exemption. This change could add significant value to taxable estates, especially for those with large pension pots. Accountants are recommending early withdrawals or alternative investments to mitigate this impact, while ensuring compliance with pension tax rules.

• Frozen Thresholds Until 2028: The NRB (£325,000) and RNRB (£175,000) remain frozen until at least 2028, despite rising property and asset values. This means more estates are likely to become liable for IHT over time. Accountants help clients plan ahead by reducing estate value through gifting, trusts, or charitable donations, ensuring they stay below taxable thresholds where possible.

For instance, Mr. Jones, a retired engineer in Manchester with a £900,000 estate including a £300,000 pension, consulted an accountant in early 2025. Anticipating the 2027 pension rule change, the accountant advised him to begin drawing down his pension strategically, using the funds to make tax-free gifts under the annual exemption and invest in assets eligible for BPR. This plan reduced his estate’s taxable value and preserved wealth for his children.

Emerging Trends and How Accountants Stay Ahead

The IHT landscape is influenced by economic, political, and social trends, and accountants are trained to anticipate these shifts. Some emerging trends as of early 2025 include:

• Rising Property Values: With UK house prices increasing by 3.5% annually (per the Office for National Statistics, January 2025 data), more estates are exceeding the NRB and RNRB thresholds. Accountants are advising on downsizing or equity release strategies to reduce estate value without sacrificing quality of life.

• Digital Assets and IHT: The rise of digital assets like cryptocurrencies poses new challenges for IHT valuation and taxation. HMRC has clarified that such assets are subject to IHT, but valuing them can be complex. Accountants are increasingly specializing in digital estate planning to ensure these assets are properly accounted for and taxed.

• Increased HMRC Scrutiny: HMRC collected £7.5 billion in IHT receipts in 2023-24, a 4% rise from the previous year, partly due to stricter enforcement (HMRC data, February 2025). Accountants help clients prepare for potential audits by maintaining meticulous records and ensuring all relief claims are robustly documented.

Real-Life Example: Planning for a Business Owner

Mrs. Carter, a 65-year-old business owner in London, owns a small manufacturing company valued at £1.5 million. Concerned about the upcoming BPR cap, she hired an accountant who recommended transferring 40% of her shares to her children now, using the seven-year rule to potentially exempt the gift from IHT if she survives until 2032. The accountant also advised setting up a discretionary trust for another portion of the business, ensuring her family retains control while reducing her estate’s taxable value. By acting early, Mrs. Carter avoided a potential £200,000 tax bill post-2026.

The Cost-Benefit of Professional IHT Planning

While hiring an inheritance tax accountant involves upfront costs—typically £1,000 to £5,000 for complex estates—the long-term savings can be substantial. With average IHT bills around £215,000 for liable estates (2021-22 HMRC data) and reliefs like APR and BPR saving families £800,000 to £950,000 on average (per IFS data), the financial benefits of professional help are clear. Moreover, the peace of mind that comes with knowing your estate is structured efficiently is invaluable for many UK taxpayers and business owners.