Not ready to gift? 5 alternative Inheritance Tax strategies

21 Aug 2026

By Chancellor

Gifting can be an effective tool for mitigating an Inheritance Tax (IHT) bill. Gifts given more than seven years before your death, or that qualify for an exemption (such as the £3,000 annual exemption), can remove assets from your estate and place them in the hands of your loved ones.

But what if you’re not ready to gift?

Most over-55s plan to pass their wealth on after they die, rather than gifting it during their lifetime, as Financial Planning Today reports.

There could be various reasons you don’t wish to gift right now. Perhaps you’re worried about running out of money in retirement, holding on to funds to support your healthcare needs in later life, or passing funds to a beneficiary who isn’t ready to receive them yet.

If you prefer not to gift – or at least not yet – there are still strategies you can employ to help manage your estate’s IHT liability.

Read on to discover five ways to help reduce an IHT bill, other than gifting.

1. Take out life cover to pay the Inheritance Tax bill

Taking out life insurance to cover some or all of your estate’s IHT liability can help your loved ones pay the bill without reducing the inheritance they receive.

In essence, some or all of the tax could be paid from an insurance payout, rather than your estate. In some cases, this can help protect key assets, such as your home, from being sold to pay an IHT bill.

If you’re planning on using life insurance to cover your IHT bill, it’s generally worth placing the policy in trust. This typically means the money is paid directly to your beneficiary, without being subject to IHT or probate.

Life insurance placed in trust can also help your loved ones pay the bill more quickly. IHT is usually due within six months of your death, with interest charges for late payment. Placing life insurance in trust may help your loved ones access the funds they need and pay the bill more quickly, without waiting for probate to be granted or assets to be sold.

2. Consider investing strategically to benefit from Business Relief

Business Relief (BR) reduces the value of a business or its assets when working out how much IHT has to be paid. It allows qualifying assets to be passed on with up to 100% relief from IHT.

As of 2026/27, 100% BR is available on qualifying assets up to £2.5 million. Eligible assets exceeding this threshold may still benefit from 50% IHT relief.

You don’t necessarily need to be a business owner to benefit from BR. The relief can also apply to shares in an unlisted company. When you die, these shares could be passed on free from IHT, provided certain conditions are met, helping to mitigate your estate’s liability.

This approach can be particularly effective if you have funds to set aside but want to retain control of them in case you need access later in life.

However, the rules for qualifying for BR are complex and the investments can be high risk. As such, this strategy may not be appropriate for everyone, and it’s worth seeking guidance from a financial planner if you’re looking to use unlisted shares to mitigate your estate’s IHT liability.

Don’t invest unless you’re prepared to lose all the money you invest. This is a high‑risk investment and you are unlikely to be protected if something goes wrong.

3. Make the most of your nil-rate bands

Normally, IHT is charged on the portion of your estate exceeding the nil-rate band, which is £325,000 as of 2026/27. However, your IHT threshold may be higher if:

You leave a primary residence to a direct descendant and qualify for the residence nil-rate band. This is worth up to £175,000, depending on the size of your estate, and means your IHT threshold could be worth up to £500,000
You inherit your spouse or civil partner’s unused nil-rate bands, which may mean you can collectively pass on up to £1 million IHT-free
Your estate includes business or agricultural assets eligible for relief, as described above.

As a result, by making the most of their nil-rate bands, a surviving spouse leaving their home to a child or grandchild could pass on up to £1 million without triggering an IHT bill – or more, if business assets are included.

Your own residence nil-rate band may be applied automatically. However, your executor will need to file a claim with HMRC if they are using any unused nil-rate band or residence nil-rate band from a late spouse or civil partner.

When the time comes to settle your estate, you won’t be here to execute your estate plan. As such, it’s important your executor understands what tax-efficient strategies and reliefs may be available to manage the IHT bill – or knows who to contact for support, such as your financial planner or solicitor.

4. Leave a charitable legacy in your will

Usually, the portion of your estate exceeding your nil-rate band (as described above) is charged at 40% IHT.

However, if you leave 10% or more of your net estate to charity in your will, your tax rate may be reduced to 36%.

The value of your donation will also be removed from your estate before IHT is calculated, helping to mitigate your IHT bill. In some cases, this strategy may help protect your residence nil-rate band. The residence nil-rate band reduces by £1 for every £2 your estate exceeds £2 million and disappears completely if your estate is worth £2.35 million or more.

By gifting to charity, you may be able to keep your estate’s value below the £2 million taper, meaning you benefit from a higher tax-efficient allowance, a smaller taxable estate, and a lower IHT rate.

5. Gift into a trust

In some cases, you may be ready to gift assets out of your estate, but are worried that now isn’t a good time for your beneficiary to receive the funds. For example, you may wish to wait until they’re older or save the money for key milestones such as purchasing a home.

By gifting the money into a trust, you could remove the assets from your estate while keeping them safe until it’s the right time for your beneficiary to receive the funds.

The options and rules for trusts are complex, so it’s wise to speak with a financial planner before making any irreversible decisions.

Define an Inheritance Tax strategy

There’s no one-size-fits-all strategy for mitigating an IHT bill. The tools and approaches that could support you in passing more of your wealth to loved ones will vary depending on your financial circumstances, goals, and priorities.

Whether you’re open to gifting, want to wait until later in life, or would rather pass your wealth on after you die, our financial planners can help you define an estate plan and IHT strategy that works for you and your loved ones.

Email info@chancellorfinancial.co.uk or call 01204 526 846 to speak to an adviser.

If you’re already a client here at Chancellor, contact your personal financial adviser to discuss any of the content you’ve read in this article.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, tax planning, trusts, or will writing.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.