UK Property and Inheritance Tax Planning – Fraser Bond Advisory Insights

Introduction

Inheritance Tax (IHT) is one of the most significant – and often overlooked – financial considerations facing UK property investors. For high-net-worth individuals (HNWI), landlords, and international investors holding assets in the UK, failing to plan for IHT can lead to substantial tax liabilities and disrupt long-term wealth transfer strategies. With property values in London and across the UK continuing to rise, smart IHT planning is essential. Fraser Bond provides bespoke property investment advice with a strong emphasis on wealth preservation, offering strategic solutions to minimise exposure to UK inheritance tax.

What Is UK Inheritance Tax?

Inheritance Tax (IHT) is charged on the value of a deceased individual’s estate above a certain threshold.

Standard IHT Structure:

• Nil-Rate Band: £325,000 per individual (unchanged in 2025)

• Main Residence Nil-Rate Band (RNRB): Additional £175,000 may apply for direct descendants inheriting a primary residence

• Standard IHT Rate: 40% on the estate value above the threshold

Who Is Affected?

• UK residents are taxed on their worldwide assets.

• Non-UK residents are taxed on UK-based assets only (including property), regardless of domicile or ownership structure.

Why IHT Planning Matters for Property Investors

1. Rising Property Values

Prime London property values often far exceed the nil-rate band, meaning substantial portions of estates are subject to 40% taxation.

2. Non-Resident Exposure

Even non-residents holding UK real estate – personally or through overseas entities – are now subject to UK IHT on those assets.

3. Impact on Heirs

Without strategic planning, heirs may face liquidity issues or be forced to sell high-value properties to meet IHT obligations.

Key Strategies for IHT Planning on UK Property

1. Ownership Structure Planning

• Joint Tenancy vs Tenants in Common: Structuring ownership correctly can help with tax planning and will writing.

• Use of Trusts: Placing property into discretionary trusts can help remove assets from the taxable estate, though this requires professional oversight due to complexity and recent legislative tightening.

• Family Investment Companies (FICs): An increasingly popular vehicle for passing wealth tax-efficiently while maintaining control.

2. Lifetime Gifts

• Potentially Exempt Transfers (PETs): Property gifted during the investor’s lifetime may fall outside the estate if the donor survives seven years.

• Annual Exemptions and Small Gifts: Investors can gift up to £3,000 per year tax-free, with additional allowances for small gifts and weddings.

3. Insurance-Based Planning

• Life Insurance in Trust: Taking out a life policy equal to the anticipated IHT liability and placing it in trust ensures liquidity for heirs without inflating the estate value.

4. Property Debt Planning

• Secured Borrowing: Mortgage debt against the property may reduce the taxable estate value. However, careful structuring is needed to avoid counterproductive results under anti-avoidance rules.

5. Regular Reviews with Tax Advisors

• IHT rules are subject to change, and regular strategic reviews are essential. Fraser Bond works with experienced tax advisors to ensure your plan stays up to date and compliant.

IHT for Non-Resident and Foreign Investors

Even if you are non-UK domiciled, UK-based property remains subject to IHT:

• Directly owned UK property is fully taxable.

• Previously exempt structures (e.g. offshore companies) are no longer immune under post-2017 rules.

Solutions include:

• Reviewing ownership structures for legacy properties

• Trusts or FICs where applicable

• Life cover to offset liability

Fraser Bond offers strategic reviews for international investors to reduce exposure and ensure assets pass smoothly to the next generation.

How Fraser Bond Supports Property Investors with IHT Planning

Fraser Bond offers tailored advisory services to ensure that property investors:

• Understand their current and future IHT exposure

• Structure property holdings for optimal tax efficiency

• Integrate property strategy with overall estate and wealth planning

• Connect with trusted tax, legal, and insurance professionals for implementation

• Build generational property portfolios with succession in mind

We combine real estate expertise with strategic insight to help investors protect and pass on their wealth effectively.

Conclusion

UK inheritance tax can have a profound impact on the long-term value of your property investments. Whether you’re a UK resident landlord or an international investor, effective planning is essential to ensure your estate is protected and efficiently transferred. Fraser Bond is committed to helping clients navigate this complex landscape, aligning property strategy with wealth preservation and generational planning.