8 ways to cut your IHT bill in 2026

Thanks to frozen thresholds, rising house prices and, from April 2027, the taxation of unspent pension wealth, the number of families that will pay inheritance tax (IHT) is expected to soar.

In fact, by the end of this decade, the Office of Budget Responsibility (OBR) is predicting that the number of families that will need to pay IHT when a loved one dies, will have doubled to 10%.

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It means that financial planners are increasingly advising their older, wealthier, clients to spend their money, or give it away to spare their family a 40% tax bill.

But, however much you might want to avoid tax, if you’ve spent a lifetime saving, it’s not an easy transition to make.

With that in mind, here are some practical ideas.

1) Take care of yourself

Anything you spend on yourself – however uncharacteristic it might feel – will get money out of your estate immediately, unlike gifts to other people, which could become subject to tax if they fall outside HMRC’s gifting allowances.

This is the time to enjoy your wealth, whether that’s through travel, activities, art, antiques or jewellery.

If there isn’t anything you’ve always wanted to splurge on, think about investing in services that enrich your life or make it easier. That could be anything from a meal subscription service, to a cleaner or a gardener. You could also spend money on your home.

Just be mindful that any major changes to your home could increase its value – and potentially your IHT bill.

2) Pay for private healthcare

As you get older, it’s likely you’ll suffer from more health problems. If you’re worried about symptoms and haven’t had the reassurance you need from your GP, or you’re in pain and stuck on a waiting list, you could go private.

You’ll be seen quicker, can choose when and where you’re treated and enjoy the comparative comfort of a private hospital.

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As a guide, research from MyTribe Insurance, found the average charge for an initial appointment with a private medical consultant is £195. A private colonoscopy costs a typical £2,421, while carpal tunnel release will set you back £2,427. Looking at bigger procedures, lumbar decompression (to treat compressed nerves in the spine) will cost an average of £9,769 compared to £14,412 for a hip replacement.

You can book consultations with private hospitals directly – their websites usually offer a wealth of information about their consultants and areas of expertise.

3) Pay into your children’s pensions

Paying into your child’s pension is incredibly tax-effective. Not only will it get money out of your estate, your child will also get the benefit of tax relief on the contribution.

Let’s say you pay £10,000 into your child’s self-invested personal pension (SIPP).  If they pay basic-rate tax they’ll get a top-up worth £2,500, taking the total investment to £12,500. Or, if they pay higher-rate or additional-rate tax, they’ll get the same top-up and be able to claim back a further 20% or 25%, respectively, from HMRC.

If that money is passed on once you’ve died, IHT would whittle it down to just £6,000.

This option might be popular for parents that want to ensure their gift is invested for the future and not frittered away as their offspring won’t be able to access the money until they reach age 55 (rising to 57 in 2028).

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When making contributions to a child’s pension, it’s important to get a firm grasp of IHT gifting rules.

Each individual can gift up to £3,000 each year tax-free (and you can carry forward last year’s allowance if you didn’t use it), but for larger gifts, in most cases you’ll need to survive seven years for them to become totally tax-free.​​​​​​​

Or, you can get around that problem by making monthly rather than lump sum payments. You can give away as much of your income tax-free, so long as you can evidence that payments are regular, from surplus income, and do not affect your standard of living.

4) Invest for your grandchildren

If your adult kids are sorted, you can skip a generation and invest in your grandchildren instead. Junior individual savings accounts (JISA) are a good starting point – they can pay in a total of £9,000 each year and there will be no tax to pay on the proceeds.

Again, you can use your gifting allowance or make use of regular gifts from surplus income rules and the money will be outside your estate straightaway.

Another option is the small gift allowance – you can give away £250 to as many people as you like, so long as they haven’t benefited from any other allowance. This might be helpful if you’ve got lots of children in your family.​​​​​​​

As they won’t be able to access the money until they’re 18, a Junior ISA (JISA) is a great way to give grandchildren a financial leg-up as they start adult life. However, you won’t have any control over what they do with the money – that will be up to them.

5) Give money to charity

Another way to cut your IHT bill is to remember a favourite charity in your will. Many charities rely on legacies to survive and it’s a particularly popular option for those who don’t have families (or don’t want their family to inherit).

But even if you want to maximise what you leave to loved ones, a charitable donation can still make sense. That’s because if you leave 10% of your taxable estate to charity, the rate of IHT you pay on the rest of your estate will be reduced from 40% to 36%.

6) Book a holiday

Booking the trip of a lifetime is a fantastic way to take a chunk of money out of your estate. But, if you don’t have the required oomph for a big holiday or fancy solo travel, you could always think about paying for a family break – whether that’s a gathering in a UK cottage or an overseas getaway.

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According to research from All Clear Travel Insurance, over half of UK grandparents (54%) have paid for a holiday abroad, but if you’re doing it as part of your IHT planning, it’s important to be mindful of gifting rules. Even if you pay for everything yourself – and don’t hand over any cash to your kids – it could still be regarded as a gift by HMRC if the people you’re taking on holiday aren’t financially dependent on you, or you’re not reliant on their care to get away.

7) Help with your children’s mortgage

Although interest rates have been edging downwards over the last 18 months or so, they’re still substantially higher than they were between the 2008 financial crisis and the pandemic.

If your middle-aged children have got a mortgage, that means they will have likely seen a substantial spike in their monthly repayments over recent years.

So, if they’re struggling with bills, contributing a bit of your spare cash to their mortgage could be a very helpful use of your wealth. Take advantage of the regular gifts from surplus income rules and the money will be outside your estate immediately.

8) Invest in your grandchildren’s education

Many wealthy grandparents invest in their grandchildren’s education by helping with the cost of private education. But you can still support their studies without making such a big commitment.

For example, you could use the regular gifts from surplus income rules to pay for music lessons or private tuition to support them if they’re struggling or preparing for big exams.

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If they’re older, they might appreciate help with the cost of going to university or learning to drive and buying a car.

Talk to your family – and an adviser

Spending money on yourself and seeing your family get the benefit of your wealth can really nourish your retirement years. But IHT planning isn’t straightforward; it’s important to get advice to work out your potential liability, the amount you can afford to spend and to ensure it’s done in the most tax-effective way. A financial planner can also help with the necessary documentation, which is particularly important if you want to make gifts from surplus income.

And, if you want to support younger generations, it’s worth involving them too and finding out what would be most helpful for them.