Help Centre/Tutorials/How to model inheritance tax

How to model inheritance tax

2 min read

Summary

The IHT tab estimates your projected estate value and IHT liability at different ages, using your existing plan data.
It applies the nil-rate band and residence nil-rate band automatically.
You can explore the impact of gifting, pension structuring, and property decisions on what your beneficiaries would receive.

Steps

1. Open the IHT tab on your dashboard.

2. The tool estimates your projected estate value at different ages based on your existing plan data — accounts, property, and growth.

3. It calculates the potential IHT liability above the nil-rate band (£325,000 per person, plus £175,000 residence nil-rate band if passing your home to direct descendants).

4. Explore the impact of gifting, pension structuring, and property decisions on what your beneficiaries would receive.

Example scenarios

"How does leaving my pension untouched affect my estate?"

Compare your projected estate value with and without pension assets included, using the account breakdown on the IHT tab. Pensions are normally treated as outside the estate, so leaving them undrawn for longer, while spending down other assets, tends to reduce the taxable estate — see Inheritance Tax (IHT) planning for more detail.

"What if I sell a property later in life?"

Model the property sale using a linked lump sum (see How to model selling a property), then check the IHT tab before and after the sale age. The property drops out of the estate calculation once sold, replaced by the net cash proceeds — the two are treated differently for IHT purposes.

Frequently asked questions

Do I need to set anything up before using the IHT tool?

No — it uses your existing plan data (accounts, property, projected growth) automatically.

What thresholds does the tool use?

The nil-rate band (£325,000 per person) plus the residence nil-rate band (£175,000) if your home passes to direct descendants. See Inheritance Tax (IHT) planning for the full explanation.