Understanding Investments: Inheritance Tax & the Confidence to Act!

Tuesday 14 October, 2025

At Lonsdale Wealth Management, we believe that the first step towards effective Inheritance Tax (IHT) mitigation is to establish a clear understanding of how much capital you expect require to live comfortably throughout your lifetime. Once this is clarified, clients often gain the confidence they need to make informed and timely decisions regarding their estate planning.

We regularly meet individuals who recognise the importance of reducing the value of their estate to avoid a significant IHT bill, yet many delay taking meaningful action. In most cases, this hesitation is not due to a lack of awareness, indeed, many have been contemplating their options for years, but rather a lack of clarity and confidence around when and how to proceed.

At Lonsdale Wealth Management, our Independent Financial Advisers follow a structured and reassuring process designed to give you confidence in your own financial future, while exploring practical steps to mitigate any potential IHT liability.

Here is an overview of the approach we take:

1. How much capital you require to live comfortably?

We begin by creating detailed cash-flow projections tailored to your personal circumstances. These projections incorporate assumptions about inflation, your day-to-day and discretionary spending, as well as potential later life costs such as care fees. This step helps establish how much capital you are likely to need during your lifetime.

2. Identify surplus capital or income

By analysing the cash-flow projections, we can identify whether you have excess capital or income beyond what is expected to be required for your financial security. We quantify what is genuinely surplus and assess how best to transfer this to future generations in a tax-efficient way, thereby reducing the overall IHT exposure.

3. Ensure Wills are up-to-date and tax efficient

We encourage all clients to ensure their Wills are current and structured to make full use of relevant IHT exemptions. This is carried out in conjunction with a trusted solicitor and includes consideration of the Residential Nil Rate Band (RNRB), where applicable.

4. Utilise annual gift exemptions

There are several exemptions which allow for the immediate removal of assets from your estate without incurring an IHT liability, provided certain conditions are met. Although many gifts require the donor to live for seven years after the gift is made, these exemptions can be very effective when planned appropriately.

5. Solutions to mitigate your estate’s IHT liability

There is a wide range of planning strategies available to help reduce IHT, including Potentially Exempt Transfers (PETs), Chargeable Lifetime Transfers (CLTs), Trust arrangements, and packaged solutions such as Loan Trusts and Discounted Gift Trusts. The most suitable option will depend on your individual needs and financial objectives.

6. Insuring any remaining liability

Where appropriate, we may recommend Whole of Life insurance policies to cover any residual IHT liability. If written in trust, these policies pay out directly to beneficiaries or trustees without the need for probate, ensuring that funds are available when they are most needed to settle any outstanding tax bill.

In some cases, minor adjustments to your existing investments and financial arrangements can be sufficient to significantly improve your IHT position. Our experienced Independent Financial Advisers at Lonsdale Wealth Management in Ringwood are here to provide professional guidance tailored to your personal circumstances.

Howard Goodship, Financial Adviser in Ringwood said:

“Placing assets into Trust remains one of the most effective ways to manage Inheritance Tax while retaining control over how wealth is passed on. At Lonsdale, we work closely with our clients to ensure every Trust strategy is tailored to their family’s long-term needs and financial goals.”

We offer a free, no-obligation initial consultation to discuss your estate planning needs. For more information, please contact us on 01727 845500 or email enquiries@lonsdaleservices.co.uk.

The value of an investment and the income from it can go down as well as up. The return at the end of the investment period is not guaranteed, and you may get back less than you originally invested. The contents of this article are for information purposes only and do not constitute individual financial advice. The Financial Conduct Authority does not regulate estate planning, tax advice, trusts and wills, cash flow plans or cash flow modelling.

Need financial planning advice?

If you would like a free initial financial planning review, complete the form below, or contact our St Albans, Barnet, Harpenden, Leeds & Bradford, Stafford, Ringwood, Ware, Wimbledon or Chippenham office.