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When you release equity in your home, you are able to also reduce your Inheritance Tax Liability.

Your Inheritance Tax liability is 40% of anything over £500,000 for single people, £1million for married. A divorced mother with an estate of £750,000 would lose £100,000 to Inheritance Tax!

Its important to think about this now. You cannot be too early to manage you IHT liabilities, but you certainly can be too late.

Important Terms


A persons estate is all their possessions and assets; this includes property, shares, cash and items in their home.

Inheritance Tax (IHT)

A government tax paid on death. This sees the deceased estate paying 40% of the estates value above the threshold.

Potential Exempt Transfer (PET)

Allows gifts of unlimited value to be transferred out of one’s estate where no inheritance tax will be payable after seven years.

What really is Inheritance Tax (IHT)?

Inheritance tax payable on the estate and assets of someone who has died. If this person owns a property, then the threshold is £500,000 and if they were married it is £1million. Anything beyond these values will be charged at 40% by the government.

Inheritance Tax is worked out by deducting all debts against all assets within an estate. Any value over the threshold is charged at 40%. This often forces family to sell assets to the Inheritance Tax bill.


Can I manage my Inheritance Tax?

Yes. By reviewing your inheritance tax liability early, you can severally cut your Inheritance Tax.

Understanding how your assets are calued now and how their values are likely to change in the futures are paramount to managing Inhertance Tax. With an 8% annual property price increase, a property worth £1million today is likely to be value around over £3 million is 15 years’ time. By taking money out of your home you get the benefit of using the funds now, with the added benefit of knowing that this money may have been swallowed up by Inheritance Tax anyway.

Gifting the money or putting it in Trust are two of the most popular and easiest methods to taking the funds out of the estate.


What can I do with my money?

You can use the money for any legal means. Home Improvement, holidays, new car, just enjoying life; the list could be endless. However, it is important the money is moved out of your estate to benefit form the reduced Inheritance Tax Bill.

Gifting the money or putting it in Trust are two of the most popular and easiest methods to taking the funds out of the estate.


What is the catch?

It’s important to understand the rules around Potentially Exempt Transfers. Under these rules, it takes 7 years for a gift or money transfer out of the estate to become “exempt” from Inheritance Tax. The earlier you are being managing this, the better.

The Potentially Exempt transfer rules are fairly simple. When the funds are transferred out of as estate, a clock starts. If that person passes away within 3 yeas, they still pay the full 40% inheritance tax on the amount. However, in year 3-4 they pay 32%, year 4-5 its 24%, year 5-6 its 16%, in year 6-7 its 8% and after year 7 is 0%.

Surviving to the end of the 7 years is the best way to ensure you don’t pay inheritance tax on the transferred sums. Though, it is possible to arrange insurance on this that would effectively pay the Inheritance Tax should a person pass away within this period.


Case Study

Mrs Harrington had some concerns over Inheritance Tax after she was widdowed.  She had assets of £1.4million, £1.25million of which was in the value of her home. She took advice and found that her IHT liability was currently £160,000, but learnt this would increase as the value in her home increased.

Mrs Harrington contacted Bright Life, upset that her and her husband had worked hard for everything she now hasowns and wanted to make sure her sons and grandchild could maximise thier benefit from her estate. We arranged to release £300,000 from her property which she gave equally to her two sons, who were incredibly grateful for the financial help.

Mrs Harrington dies 10 years later, however the property value has increased to £2.5 million. The sons still had to pay some inheritance tax, however £160,000 was removed from the IHT bill due to Mrs Harringtons release. The Sons commented they would have liked their mother to have taken more as this would have reduced the IHT bill further and given them a greater boost when they really needed it.

What can you do?

The first thing you could consider is taking cash or other assets out of the estate. The same P.E.T. rules apply to this.  However, most people have their wealth tied up in their home and would require specilist advise to be able to access this.

Taking wealth out of your home can be a simple process, with the right help and can take as little as 4 weeks. By arranging a Later Life Lending Product with companies such as Aviva and Legal and General we can release funds in your home for you to gift or put into trust and start the P.E.T. clock ticking.

Bright Life are an award-winning financial services and estate planning specialist, who work closely with our clients to get them the most suitable financial outcome for them and their family. We are upfront, honest, and experienced. We only charge fees on completion, so getting more information or assessing how we could help manage your inheritance tax is completely free.

We are proud to be members of the Equity Release Council and regulated by the Financial Conduct Authority. We are trusted and respected industry wide.

Bright Life
5 Star Review

“There is everything to recommend about Bright Life. It does just that! I didn’t think there was a way out of my particular problem and it was weighing me down, but just one phone call to Bright Life and I was proved wrong. An extremely friendly and helpful service that’s hard to match. Good luck Bright Life, may you go from strength to strength.”

Mrs Wright, Lancaster

How to get started

Its easy to get started, you can do it right now!

Simply complete the form below and we will start putting our Financial Report together to give you a your bespoke “IHT Liability Report”. We will use the information you have provided to give you real facts figures and advice.


What’s the Cost?

We provide the “IHT Liability Report” completely free of charge, with no obligation or pressure. For us its important that you understand your options before committing to anything.

Still have questions?

Our best advice is to first complete the questionnaire. It only take 12-15 minutes and provides us with plenty of details to make our “IHT Liability Report” accurate, insightful and (best of all) bespoke to you. The Report itself will answer most questions for you, you will also have a Specialist Advisor on hand you can contact via email or call to cover any remaining questions.

You can still contact us by using the Contact Form below or call the office and we would always be happy to speak to you.

Tel: 020 8064 0488

Feel free to get in touch using our contact form below. We are always happy to hear from clients old and new.

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Important Information

Your home may be repossessed if you do not keep up repayments on your mortgage.

Most forms of buy to let mortgage are not regulated by the Financial Conduct Authority.

The information contained in this website is subject to UK regulatory regime and is therefore intended for consumers based in the UK.

©2020 by Bright Life. Bright Life is a trading style of Mark Wainwright, an Appointed Representative of The Right Mortgage Ltd, which is authorised and regulated by the Financial Conduct Authority.

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