Wealth transfer strategies for high-net-worth families: practical steps to pass on wealth tax-efficiently

Intergenerational wealth planning works best when tax, investment, family governance and timing are aligned. Get those elements pulling in the same direction and you gain clarity, flexibility and far fewer surprises later on.

This guide sets out practical options using current UK rules and allowances. It covers how lifetime gifting fits alongside trusts, pensions and family companies, where business and agricultural reliefs can help, and why pensions still play a central role even after recent changes. For internationally mobile families, it also highlights the shift towards residence-based inheritance tax exposure, so decisions on timing and location are taken with eyes open.

Start with goals, not tax

Before optimising tax, be clear about what you’re trying to achieve over the next 10–20 years:

• Who should benefit, when, and with what safeguards?
• How much income and security does the donor need now and later?
• Which assets are suitable for lifetime gifts, and which are better retained?
• What level of complexity, cost and investment risk feels acceptable?

Agreeing these principles early—ideally with the family members involved—reduces friction later and guides decisions between gifts, trusts, pensions, companies and philanthropy.

Lifetime gifting: use exemptions first

Lifetime gifts reduce the taxable estate and move future growth to the next generation.

Simple, repeatable exemptions

• Annual exemption: £3,000 per tax year (with one year’s carry-forward).
• Small gifts: up to £250 per recipient.
• Wedding gifts: up to £5,000 to a child, £2,500 to a grandchild.
• Normal expenditure out of income: unlimited, provided gifts are regular, made from surplus income and don’t reduce your standard of living. Good records are essential.

Potentially exempt transfers (PETs)
Large gifts to individuals fall outside inheritance tax if the donor survives seven years. Taper relief applies after year three. PETs remain a cornerstone where control through trusts isn’t required.

Practical points

• Prioritise assets with strong growth prospects.
• Consider capital gains tax before gifting; use annual CGT exemptions and spouse transfers where appropriate.
• Keep a simple gift log to speed probate and reduce queries from HM Revenue & Customs.

Trusts: control and protection

Trusts can separate control from benefit, protect vulnerable beneficiaries and support long-term governance. They do, however, come with entry, ten-yearly and exit charges above the available nil-rate band, and the £325,000 band is shared across related settlements.

Trusts work best when:

• their purpose is clear (education, housing support, protection), and
• their size reflects expected tax charges.

Residence nil-rate band (RNRB)
If your estate is near £2m, the RNRB tapers away. In some cases, lifetime gifts that bring the estate below this level can restore some or all of the £175,000 allowance on death.

Business and agricultural reliefs

Qualifying business property and certain unquoted or AIM shares can attract 100% or 50% inheritance tax relief after a two-year holding period. Relief is generous but not automatic—trading status, ownership periods and excepted assets all matter.

From April 2026, a combined £1m allowance applies for the 100% rate of business and agricultural property relief per individual, with unused allowance transferable to a spouse or civil partner. Amounts above this threshold receive relief at 50%.

Family investment companies (FICs)

FICs can help families retain control while passing value through growth shares. They work best where:

• capital is being retained rather than heavily distributed,
• share classes are clearly designed, and
• ongoing company compliance is accepted.

FICs don’t carry specific inheritance tax reliefs, but they can sit alongside trusts to balance control and protection. Proper tax, legal and corporate advice is essential.

Pensions: still central

Pensions remain one of the most effective long-term planning tools.

• Contributions up to £60,000 a year (subject to tapering and MPAA rules).
• New allowances now cap tax-free lump sums rather than total pension size.
• From April 2027, most unused pension funds will fall within the estate for inheritance tax, making nomination reviews and estate liquidity planning critical.

High earners should test affordability well ahead of retirement and coordinate pension strategy with ISAs, general investments and gifting plans.

Charitable giving

Philanthropy can reduce tax while reinforcing family values.

• Gift Aid and inheritance tax relief now focus on UK charities.
• Gifts of shares, land or property can attract income tax relief and no CGT.
• Donor-advised funds offer flexibility without the complexity of running a charity.

Leaving at least 10% of the net estate to charity can reduce the inheritance tax rate to 36%.

Property, portfolios and CGT

• Review how much housing wealth sits inside the taxable estate.
• Watch the £2m RNRB taper and upcoming high-value council tax surcharge.
• Use CGT exemptions, spouse transfers and bed-and-ISA strategies to improve flexibility.
• Revisit withdrawal order annually; for some families, preserving pensions while using other assets for gifting produces better outcomes.

Cross-border families

The move to residence-based inheritance tax and the new foreign income and gains regime mean timing matters more than ever. Inbound, outbound and internationally mobile families should map residence, tax exposure and trust structures well in advance.

Keep documents and governance current

Tax efficiency fails if paperwork lags behind intent. Review wills, letters of wishes, powers of attorney and executor readiness regularly. An annual check avoids costly oversights.

A practical 90-day checklist

• Update net worth and cashflow projections.
• Confirm pension and insurance nominations.
• Use available inheritance tax exemptions.
• Model the RNRB taper if near £2m.
• Review business relief eligibility and the new £1m allowance.
• Align pension funding with the new allowance framework.
• Review cross-border exposure and older structures.

Bringing it together

Effective wealth transfer is rarely about one clever tactic. It’s about setting a destination, using annual allowances consistently, and applying structures only where they add real value. Plans should evolve as rules, markets and family circumstances change.

If you’d like help prioritising actions for 2026, we can model options, test sensitivities and map out what to do now, what to defer and what to keep under review.

If you want practical, tailored guidance, get in touch.