Are your middle-income clients getting quietly pushed into higher death duty brackets?

November 11, 2021

According to several think tanks, thousands of middle-income families are now heading towards the 40pc bracket for inheritance tax (IHT). This is partly due to rising property prices, but is also due to the five year freeze in tax allowances announced in the spring.


Whilst more middle income earners find themselves with higher value assets and bigger pots of savings, the IHT allowance will remain steady at £325,000 for the next five years. Quietly pushing unsuspecting clients above the tax-free threshold. In fact, the Office for Budget Responsibility predicts the number of additional people reaching this threshold will number more than 41,000 per year by 2026.


For example, Zoopla reports that the average house price for a detached property in the South East is now £625,000 and with wages rising and inflation set to increase, more middle income earners could indeed find themselves subject to IHT.


The main residence nil-rate band is also set to stay at £175,000 and applies to anyone passing their family home to a direct descendent. This tax was introduced in order to protect middle-income earners from paying an inheritance tax originally aimed at higher earners. However, the average house price across the whole of the UK now stands at £325,384 according to Zoopla.


So, what can you do to help our clients navigate this challenge?’s industry leading Will drafting software enables practitioners to effect highly nuanced estate planning to help ensure that estates are left in the most tax efficient way possible. For example, it is possible to quickly and simply:


  • Put trusts into a Will to prevent property becoming part of the estate of a spouse (or other beneficiary) on the death of the testator and thus would not add assets to the estate of the beneficiary, thereby potentially pushing them over the IHT threshold;
  • Split out the RNRB to protect it for direct lineal descendants while putting the remainder of the estate into a trust;
  • Create flexible life interest trusts which allow for a life interest (terminating in a discretionary trust) over the course of which capital and income can be divested to the life tenant and the discretionary beneficiary, thereby reducing the size of the asset over the course of the life interest.


Other things to consider in relation to estates approaching the IHT threshhold:

  • Set up a scheme of lifetime gifting to reduce the size of the estate on death. Such gifts will be potentially exempt from IHT until the testator has survived the gift by 7 years – if they die within the seven years, the gift becomes a failed potentially exempt transfer and IHT (on a reducing scale) will be chargeable. This risk of death within the 7 years (and hence the potential IHT liability) can, however, be insured against.
  • Transfer assets into a trust so that they do not form part of the death estate – a range of lifetime trusts can be quickly and easily created in Arken Lifetime – care must be taken here that gifts into trust do not impact on the status of any other lifetime gifts that have been made. Specialist tax advice should be employed when considering complex lifetime gifting, particularly using trusts, but the potential tax savings can be significant.
  • Inform your potential new clients, let them know they may be heading towards the death duty threshold and generate more leads as a consequence. You can reach more clients with’s lead generation tools, such as Arken Intestacy and Online Wills.


For more information about how to streamline and double the number of Wills you can produce, visit our website or read more about our comprehensive Will writing software.

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