Why You Should Think About Inheritance Tax – and 6 of the Most Common Mistakes

By Marcus Perks, Independent Financial Adviser | Supportive Financial Planning.

For many people, passing on their hard-earned wealth to children and grandchildren is a deeply held goal. But without careful planning, a large portion of your estate could be lost to Inheritance Tax (IHT)—and that’s where thoughtful, early advice can make all the difference.

Recent research cited in the Financial Times shows that more than £100 billion is gifted or inherited in the UK every year, a number that’s expected to double again by 2040. Yet 70% of affluent families lose their wealth by the second generation—and 90% by the third. One of the biggest culprits? Poor estate planning and the erosion of wealth through IHT.

At Supportive Financial Planning, we work with families to help preserve their legacy. Below, we outline the six most common mistakes people make when it comes to inheritance tax planning—and how to avoid them.

1. Putting Off IHT Planning

It’s human nature to delay thinking about things that seem far off—but when it comes to inheritance tax, waiting can cost you dearly. Many clients only act after a health scare or family event, by which point options may be limited. The sooner you start planning, the more flexibility and tax efficiency you gain.

2. Thinking “It’s Not Worth It”

Some people assume that because they can’t completely eliminate inheritance tax, it’s not worth trying. But partial planning is better than none at all. Even small adjustments can result in significant savings for your loved ones.

3. Misunderstanding the Rules

Many families miss out on valuable reliefs simply because they don’t know they exist. For example:

• The £3,000 annual gift exemption

• The £250 small gift exemption

• The ‘gifts from income’ exemption

• The nil-rate band and residence nil-rate band, which are often misapplied

Getting advice on how to properly use these allowances can greatly reduce your IHT liability.

4. Relying on One Strategy

Some individuals only explore one type of solution—like a trust or a single product—without understanding how a mix of strategies can work better. At Supportive Financial Planning, we help clients build holistic, multi-layered estate plans that combine gifting, investment, trust planning, and more to maximise efficiency.

5. Forgetting the Long Game

Time is your ally when it comes to inheritance tax planning. The 7-year rule means that gifts made more than seven years before your death are usually outside your estate for IHT purposes. Even gifts made three to seven years before death benefit from taper relief. The earlier you act, the more effective your plan will be.

6. Skipping Professional Advice

IHT legislation is complex and frequently changing. While online calculators and general advice can be helpful, nothing beats personalised guidance from a qualified professional. Too many people make costly errors by trying to handle it all themselves.

Take Control of Your Legacy

Inheritance Tax doesn’t need to be a burden—or a surprise. With proper planning, you can take meaningful steps to preserve more of your wealth for the next generation.

At Supportive Financial Planning, our Chartered Financial Planner and IHT specialist will help you create a tailored strategy that reflects your values, protects your family, and maximises your estate’s potential.

📞 Call us on 0345 337 3414.
📧 Email us at cliveperks@supportivefp.co.uk.
🌐 Or request a free consultation by clicking on our "schedule a call" button.

Disclaimer: This article is intended for information purposes only and does not constitute personalised financial advice. Please seek guidance from a qualified adviser before making financial decisions.