Property estate planning and inheritance tax

If you’re planning on passing your property investments to your family in the future, it’s worth planning for inheritance tax with your accountant as the liabilities differ between privately owned and company owned property.

Personally owned properties

Inheritance Tax (IHT)

Inheritance tax (IHT) is a tax based on an estate’s value after a person has died. The standard inheritance tax rate is 40%, and this is charged on the part of the estate that is above the threshold of £325,000.

There are reliefs, exemptions and reductions available to reduce the rate of inheritance tax that is due. It’s certainly worth having a conversation with your property accountant to plan for IHT if you are planning on gifting your privately owned property to your family.

The ‘7 year rule’ is in place to taper the tax on gifts made between 3 and 7 years before your death.

Inheritance Tax taper relief rates

Years between gift and death Tax paid
less than 3 40%
3 to 432%
4 to 524%
5 to 6 16%
6 to 7 8%
7 or more0%
Company owned properties

Limited company owned property

Property held within a company gives more options when it comes to planning for inheritance tax. If you plan to pass your business on to your family in the future, it’s much simpler to transfer a limited company (shares) than a privately held property. In this circumstance, as the property remains owned by the company, it could also be protected from stamp duty, inheritance tax and capital gains tax liabilities.