Financial Insights

Tax and Inheritance Planning

5th Dec 2022

4 minute read

Paul Dredge

Paul Dredge

Client services director

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Mariel Diez

Mariel Diez

Head of content

Compare Wealth Managers


Inheritance tax often catches families unawares, and leaves them facing an unexpected tax bill from HMRC.


What is Tax and Inheritance planning?

Tax and inheritance planning involves arranging your finances in ways that help to reduce or eliminate the amount of tax you pay. This can include inheritance tax, which your family will be required to pay on the value of your estate when you die.

What does Tax Planning cover?

Tax planning can ensure you are making the most of existing tax allowances, and it can structure your finances in ways that make your income and investments more tax efficient. For example, a wealth manager or financial adviser specialising in tax planning could:

  • Make sure you are maximising the return on your investments by making use of your annual ISA allowance.
  • Reduce your capital gains tax bills with better investment planning.
  • Recommend you invest in tax-efficient investment vehicles, such as Venture Capital Trusts, the Enterprise Investment Scheme and the Seed Enterprise Investment Scheme, which offer significant tax relief on the amount you invest.
  • Help you to make tax-efficient pension contributions, thereby passing on pension funds tax-free to your spouse and family without breaching any allowance limits.
  • If you’re approaching retirement, they can structure your investments and pension to reduce the amount of tax you pay on your annual retirement income.

What does Inheritance Planning cover?

Inheritance tax often catches families unawares and leaves them facing an unexpected tax bill from HMRC. If you’re planning to leave behind an inheritance for your loved ones, a wealth manager can help you to consider a number of inheritance planning options that will allow you to reduce the amount of inheritance tax your family is likely to pay.

For example, inheritance tax planning can help you to:

  • Make full use of current inheritance tax allowances, such as the nil-rate band and residence nil-rate band.
  • Recommend gifting strategies that reduce the value of your taxable estate, without falling foul of HMRC rules.
  • Make arrangements to place some of your assets into trust, so they can be left to children, grandchildren or anyone else you choose, without forming part of your taxable estate.
  • Take out a life insurance policy that could cover any inheritance tax bill.
How do you pay for Tax and Inheritance Planning?

Most wealth managers will be happy to have an initial meeting with you free of charge. During that meeting, they’ll explain any future payments you’ll be expected to make. You can expect to pay an ongoing management fee for the services you receive from your wealth manager, and you may need to pay for any specific services, such as setting up a trust.

What will the initial meeting be like?

People feel most uncomfortable talking about two things: money and death. So, it’s not unusual if you go into the meeting feeling a little apprehensive. Don’t worry though, the wealth manager you meet with will be an expert in this area and will be able to put you at ease. The wealth managers we work with have been carefully chosen based on their ability to offer sensitive but straightforward advice. You should leave the meeting feeling that you’ve taken a big step towards putting your affairs in order.

What’s most important to remember?

It’s important to understand that tax planning and tax efficiency is not the same as tax avoidance. You are perfectly entitled to use tax planning strategies that legally reduce the amount of tax you (or your family) are required to pay. Tax avoidance involves bending the rules by making transactions that serve no purpose aside from avoiding tax. None of the wealth managers we put you in touch with will ever recommend a service or product purely for the means of tax avoidance.

In our experience…

Tax and inheritance planning are two areas where it really does not pay to ‘do-it-yourself’. Tax rules can change frequently, and it’s easy to forget to keep estate planning up-to-date. Working with a professional who knows tax legislation inside out can be a real advantage when it comes to reducing the amount of tax you need to pay. Working with a professional who knows tax legislation inside out can be a real advantage. They’ll often reduce the amount of tax you need to pay and ensure your tax planning strategy is kept up-to-date.


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