The Fiscal Drag Effect: Why Solicitors and Accountants Should Be Talking to Financial Planners About Inheritance Tax
The freeze on the inheritance tax (IHT) thresholds (the nil rate band and the residence nil rate band) has been extended to 5 April 2030; IHT receipts receipts are at record highs; and two big rule shifts are coming into view (APR/BPR reform from April 2026; pension death-benefit/IHT changes from April 2027). The estates of more clients are being dragged or dragged further into inheritance tax. Many, if not most, of those clients are strongly disaffected towards IHT. And many of those clients will be interested in "doing something" about IHT but without losing control and/or access to the funds or assets to be used in IHT planning. And you know that to do this tax efficiently you need to sidestep the Gift With Reservation provisions. This briefing turns that reality into practical plays you can run with us to achieve those objectives - using appropriate financial products and strategies, often combined with appropriate trusts.
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The Numbers Tell a Compelling Story
Our latest pulse* of £1m+ business owners (N=400) reveals why your role is pivotal in inheritance tax planning. The data shows a clear mandate for professional advisers to lead the conversation.
74.7%
Expect IHT Exposure
Business owners who expect to fall into IHT either now or on sale
29.2%
Ready to Act
Would implement planning this year if they can retain access to transferred capital
71.8%
Implementation Rate
Say they'd implement a joint plan within 12 months when led by their accountant / solicitor
In short: if you lead, clients move. The pages that follow give you the checklists, structures and funding routes to consider to make that happen - fast and effectively.
*This is example Pulse data is generated by our proprietary Professionals Avatar. Once live Pulse data will be driven by Rathbones owned research we will run.
Executive Summary: The Perfect Storm
Frozen Thresholds Extended
The nil-rate band (£325,000) and residence nil-rate band (£175,000) - including the £2m RNRB taper threshold - are fixed through tax years 2028/29 and 2029/30. That extends the freeze first set to 2028 and deepens fiscal drag.
Record Receipts Rising
HMRC reports £8.2bn of IHT receipts in 2024/25 (provisional). The OBR projects IHT will rise to £14.3bn by 2029/30, partly reflecting policy changes.
More Estates Paying
HMRC's latest liabilities statistics show 31,500 estates paid IHT in 2022/23 (up 13% year on year), with 4.62% of deaths incurring a charge. This percentage will almost certainly be greater if expressed as a proportion of the estates of advised clients.
Asset Values Climbing
Average UK house prices in August 2025 were ~£273,000 (England: ~£296,000), up year-on-year - pulling more estates into scope.
Major Rule Changes Coming resulting in more assets/asset value becoming subject to IHT
Business & Agricultural Relief reform (from 6 Apr 2026): 100% relief capped at £1m (combined APR/BPR), with 50% relief above that; certain "not listed" shares (e.g., AIM) move to 50% relief.
Unused pension pots on a member's death to fall within IHT (from 6 Apr 2027): Government policy confirmed following consultation.
Many Clients Want Planning Without Giving up Control/access
Fiscal Drag and the Growing IHT Burden
The extension of frozen thresholds to 2030, combined with rising asset prices, has created an unprecedented fiscal drag effect. Average UK house prices in August 2025 reached approximately £273,000 nationally, with England averaging £296,000. This continued growth since 2020 has significantly widened the gap between frozen allowance bands and actual asset values, pulling more estates into the IHT net.
The numbers paint a stark picture:
IHT receipts have climbed from £5.4bn in 2020/21 to a record £8.2bn in 2024/25 (provisional), with the OBR forecasting £14.3bn by 2029/30. This dramatic increase is driven by the ongoing freeze through 2030 plus forthcoming reforms to APR/BPR and pensions. Meanwhile, the number of estates paying IHT reached 31,500 in 2022/23 - representing 4.62% of deaths and marking a 13% year-on-year increase.
The Planning Dilemma: Control and access vs. Tax Efficiency
The typical client tension centres on a fundamental conflict: "I want to reduce my estate for IHT, but I may still need control over the eventual destination of the assets or even income from or access to the assets to be used in planning." This creates a planning paradox that traditional approaches struggle to resolve.
The Outright Gift Problem
Outright gifts can be super-effective for IHT but will mean complete loss of control over and access to the assets in question. The outright gift will not generate an IHT liability at the time of the transfer (regardless of the size of the gift) but will create a 7-year potentially exempt transfer (PET) tail on the value of the value gifted. Clients who may need future access to capital find this approach practically and/or emotionally unacceptable, leaving significant IHT exposure unaddressed. Depending on the asset given there could also be a CGT challenge to consider when the gift (usually deemed to be a disposal at market value) is made.
The Gift With Reservation (GWR) Risk
Gifts with continuing benefit risk triggering Gifts With Reservation rules (FA 1986 s102) - pulling assets back into the estate for IHT purposes. Poorly-documented "side arrangements" can trigger POAT income tax charges, creating additional tax liabilities.
The Planner Solution
Robust, insurance and trust-based funding for the liability combined with appropriate investments inside appropriate trusts can materially and positively improve the financial outcomes for the client and their family.
This is where professional financial planners add critical value: designing compliant, tax effective structures that balance IHT efficiency with practical client needs for access and control.
Trust/financial product -Based Planning Solutions: A Strategic Map
The following structures represent frameworks, not product recommendations. Suitability and tax treatment depend entirely on individual client circumstances and precise legal drafting. Each solution addresses different client needs whilst avoiding running up against the GWR and POAT rules. All solutions require cash to be available or accessible to implement, If a disposal of chargeable assets is required to release cash then CGT may need to be considered. This can be especially important for older individuals.

Critical Guardrails: Avoid GWR/POAT by excluding settlor(s) from benefit (beyond the defined right in a DGT or right to loan repayments in a Loan Trust right) and by documenting intent and operation carefully. Excellent opportunity for collaboration between professionals.
How This Works: Three Client Scenarios
Case A: Retain Access to Capital but give away growth (Loan Trust)
Client: Robert (67), sold his business; personal estate ~£4m(£2m in cash)
Action: Loans £1m to a discretionary trust; trustees invest in an investment bond.
Effect: The loan stays in Robert's estate; all growth accrues outside. He can recall loan repayments if and when needed; not a GWR because access is limited to repayment of the debt and Roberts status in relation to the trust is as a creditor not a beneficiary. The investment bond facilitates tax efficient and administratively simple access to capital for the trustees to make loan repayments to Robert. On death, the outstanding loan is a debt due to the estate. If trust grows to £1.5m (and assuming no loan repayments taken) £0.5m is outside the estate with no chargeable lifetime transfer having been made → ~£200k IHT saved at 40%. The saving would be greater to the extent that any loan repayments are taken and spent. If Robert no longer required access to the loan he could write this off in the future though this would represent a transfer for IHT at that time.
Case B: Can give up access to capital but need regular payments (DGT)
Client: Margaret (72), widowed; £1m available cash to plan with, needs c. £20k p.a. but can afford to give up access to capital.
Action: Invests £500k into a Discretionary DGT with 4% p.a. withdrawals. Medical underwriting produces a discount (e.g., £175k, illustration only). So the transfer of value is £325,000 and thus within Margaret's ,as yest unused, nil rate band.
Effect: The discounted element is treated as the value retained; transfer value for IHT is therefore reduced to the level of the nil rate band and no liability to IHT arises in relation to the DGT when the gift is made. If Margaret dies within 7 years of the plan's establishment, the actuarial discount will ensure that no "deferred liability " will arise either - though the nil rate band will not be available to the remainder of Margaret's estate. Once Margaret survives 7 years the transferred value (and all future growth) is outside of her estate and the nil rate band is "re-available".
Case C: Fund the IHT Liability (Protection in Trust)
Clients: Jo (70) & Sam (70); joint estate ~£2.m including the home. Wills leave the entire estate of the first to die to the survivor and then to the children equally. They both have more than enough pension income and income from investments but no material lifetime gift of capital possible. They wish to "do something" about IHT.
Action: Joint-life, second-death whole-of-life policy in trust sized near the expected IHT. The monthly premium cost for £400,000 of cover payable on the death of the survivor of Jo and Sam would be in the order of £500 dependant on underwriting. Their children could contribute to the cost of this simple, tax efficient solution
Effect: Premiums should (depending on the circumstances) be exempt as normal expenditure out of income. The sum assured would be paid IHT free to the trustees (not the estate) for the deceased's beneficiaries to meet the IHT due on the death of the survivor of Jo and Sam.
Note: The optimum investment (on tax and administrative grounds) underlying the Loan Trust or the DGT would be a UK or International investment bond. Collective investments could underpin the Loan Trust. Financial advice would be essential to making the right choice.
The Legal & Accounting Interface with financial planning: Where Collaboration Matters
For Solicitors
  • Documentation: This will usually be provided in draft format for your approval in relation to all of the structures referred to.
  • Align documents: Ensure trust provisions, beneficiary classes and letters of wishes dovetail with the Will and any family governance structures.
  • Stay out of GWR/POAT territory: Ensuring that the settlor's rights are limited to what the structure allows (e.g., fixed DGT withdrawals; loan repayment only for the loan trust). Poorly-drafted "access" creates GWR (FA 1986 s102) and may trip POAT.
  • TRS compliance: Register new express trusts and update within 90 days of changes; non-taxable trusts are in scope but not where the only underlying asset is a life insurance protection plan.
For Accountants
  • IHT modelling: Reflect frozen thresholds to 2030 and run scenarios including the 2026 APR/BPR cap and 2027 pensions change.
  • CGT interface: Transfers into discretionary trusts are CLTs for IHT. This means that if there is a transfer or disposal of a chargeable asset to facilitate the IHT solution and a chargeable gain arises then consider hold-over relief (TCGA 1992 s260) to defer CGT.
  • Business Relief: It has been confirmed that any post April 2026 IHT liability on qualifying business relievable property can be paid in 10 annual interest free instalments.
  • Normal and reasonable expenditure out of income: Keep accurate records for when a claim ( say in relation to premiums under protection policies in trust) is made on death.
Why Engage a Financial Planner with Rathbones
Inter-professional collaboration is the difference between a neat structure and a working plan that stays compliant, liquid and fit for life's changes. Each professional brings core strengths, but working in isolation creates significant risks.
Solicitors
Core strength: Legal validity; drafting; Will/trust alignment
Risk if working alone: Structure fails tax/operational/investment appropriateness tests or creates financial liquidity pinch
Combined outcome: Legally robust, financially astute , operationally smooth plan
Accountants
Core strength: Modelling possible tax liabilities; tax planning strategy; CGT/IHT compliance; valuations
Risk if working alone: Missed financial-product related routes to smoothly mitigate tax/cash-flow risk
Combined outcome: tax and financial planning optimisation
Financial Planner
Core strength: Implement and review financial planning strategies founded on financial products and, where appropriate, trusts
Risk if working alone: Client relevant legal/tax nuances possibly missed
Combined outcome: "living" , outcome focussed financial plan that is legally and tax effective
Rathbones advisers coordinate cash-flow, risk/return, financial product selection and management, trust selection (but not execution) and collaborate with a clients other professional advisers to ensure that the plan / strategy is as legally, fiscally and financially effective as it can be. The plan will then be monitored as rules, markets and individual circumstances change. Through collaboration with the clients other professional advisers Rathbones create a living plan that adapts to client, tax, legal and economic circumstances.
Rathbones Pulse: HNW Entrepreneurs on IHT
To ground the planning strategies outlined above in client reality, we ran a focused pulse of UK £1m+ business owners (N=400). The findings are practical, not academic: who is already in IHT (or will be on exit), what actually unlocks action (access to capital, predictable withdrawals, in-trust liquidity), and who they call first. Most importantly, the data shows clients are far more likely to implement when their accountant/solicitor leads a joint plan with a financial planner.
Headline Finding #1: Most Owners Expect IHT Exposure
36.5%
In Scope Today
Say they are in scope for IHT liability even without selling their business
38.2%
On Sale
Will be in scope for IHT on sale at current valuation
15.0%
Not in Scope
Believe they are not in scope ( and will remain not in scope ) for IHT
10.2%
Unsure
Are uncertain about their IHT exposure
Confidence in their self-assessment averages 6.7/10 overall, rising to 7.2/10 among those already in scope. This suggests that awareness increases with proximity to the problem, but many owners remain uncertain about their true current or potential future exposure to IHT.
Headline Finding #2: Access and Liquidity Unlock Action
29.2%
Access to Capital
Would act this year if they could keep access to capital transferred (e.g., repayable loan)
20.5%
Life Policy in Trust
Would act if a life policy in trust covers the future bill
19.8%
Regular Withdrawals
Want regular withdrawals from transferred assets
14.0%
Cash-Flow Model
A clear cash-flow model would persuade them to act
Governance/control matters for 10.2%, admin simplicity for 4.2%, and only 2.0% say "nothing would make me act." The message is clear: solutions that preserve access while delivering tax efficiency are the key to unlocking client action.
Headline Finding #3: Accountants and Solicitors Are the Gateway
First port of call when considering IHT planning:
  • Accountant: 45.0%
  • Solicitor: 23.8%
  • Financial planner: 19.2%
  • Private bank/family office: 9.0%
  • No professional: 3.0%
If presented with a joint plan by their accountant/solicitor and a financial planner (cash-flow, structure, funding), 71.8% are likely/very likely to implement within 12 months.
Propensity to implement rises to 80.0% when a solicitor is the first call and 76.1% when an accountant is first (+8.2pp and +4.3pp vs overall). It is lower when owners start with a financial planner (57.1%), underscoring the gatekeeper role of legal and accounting advisers.

So What #1 – Act Pre-Exit
Across exit horizons, the share expecting to be in scope for IHT today or on sale is very high:
  • 0–2yrs: 71.4%
  • 3–5yrs: 75.5%
  • 6–10yrs: 72.2%
  • 10+yrs: 81.8%
Owners far from exit are not insulated; early interventions still bite.
Spot It. Flag It. Fix It - Together.
With IHT thresholds frozen through 2029/30 and receipts already at record highs and expected to increase, expect more estates, more complexity - and more value in joined-up planning. Now is the moment to audit client estates, spot the "control vs IHT efficiency" tension, and collaborate with Rathbones to explore where financial product founded, trust-based, compliant solutions that provide access and liquidity while reducing exposure could be relevant for clients. Essentially, carry out an IHT and estate planning readiness audit on your clients.
1. Run a 15-Minute IHT Exposure Check
Identify clients with expected taxable estates >£500,000 (single) or >£1m (couple), and any with business/farm assets or sizeable DC pensions. Focus on estates near/above £2m (RNRB taper), business owners expecting or planning for sale or with business value in excess of £1m ,property-heavy estates, and DC pensions intended for heirs.
2. Convene a Joint Case Huddle
Work with Rathbones to produce a one-page plan: cash-flow proof under frozen thresholds to 2030, the right wrapper (Loan Trust vs DGT) to move value outside of the estate without triggering an immediate IHT liability while preserving appropriate access to capital or fixed withdrawals, liquidity provision to meet the IHT liability through regular premium funded life assurance in trust to avoid forced sales with governance, compliance and regular review baked in.
3. Book Clients into Implementation
We'll manage (and share with you ) ongoing monitoring so the structure stays tax-efficient, liquid and aligned to the achievement of client objectives. If you have even one client who "won't gift because they might need the money," that's a Loan-Trust/DGT conversation waiting to convert…possibly with appropriate life insurance in trust to meet the remaining liability. For some, protection in trust may be the solution that best aligns to needs.
"Introduce us; we'll bring our financial planning expertise incorporating modelling, investment and tax wrapper selection - and you keep the client protected, informed and on the front foot."