What is the loophole for Inheritance Tax in the UK?

There are multiple loopholes for Inheritance Tax in the UK, including allowances, gifts and exemptions available from HMRC.

Paying off Inheritance Tax can be a burden. The standard 40% rate, the 6-month payment deadline and unforeseen financial issues, such as an estate not having enough cash available, can put a huge amount of pressure on executors. 

Not to mention the fact that families are often already going through an emotionally difficult time.

And, even with the most meticulously planned estates, executors may still struggle to find the funds to cover the IHT payment in full. 

This is where Provira’s Estate Advance can provide a simple route forward.

Giving executors up to 50% of the net value of the estate within days, our loan:

• Charges simple interest, not compound interest, saving you money in the long run
• Does not assign any personal liability 
• Deals with HMRC payments and legal discussions directly
• Is paid off in full when the estate has been settled and funds are released

For more information, explore our Estate Advance here.

What is Inheritance Tax?

Inheritance Tax is a tax charged on the value of someone’s estate when they die. The rate of Inheritance Tax currently sits at 40%. This is applied to anything above the tax-free allowance.

The tax-free allowance, or nil rate band, allows people to pass on up to £325,000 without paying any Inheritance Tax. 

Most importantly, Inheritance Tax must be paid within 6 months of the date of death. 

This is before any assets can be sold to release cash from the estate which could be used to cover an Inheritance Tax bill.

If Inheritance Tax is not paid by the deadline, HMRC charges interest for all late payments and there is a risk the estate could be hit with additional penalties. 

As a result, many families explore all the loopholes available in order to lower the cost of their Inheritance Tax bill.

How much can you inherit from your parents without paying Inheritance Taxes in the UK?

In theory, there is no limit to how much you can inherit from your parents without paying taxes. This is because, in the UK, you don’t personally pay Inheritance Tax. 

It is charged to the estate on the value that sits above the £325,000 nil rate band prior to the inheritance being passed on. 

While a tax rate of 40% is applied to anything above this threshold, there are exemptions that can be applied if you are a direct descendant. 

They provide great loopholes for Inheritance Tax that mean you can inherit more tax-free.

Residence nil rate band

This is an additional allowance of £175,000 if a main home is left to children or grandchildren. If you combine that with the nil rate band, that means £500,000 can be passed on tax-free per parent. 

Spousal exemption

If two people are married or in a civil partnership, they can pass on all of their assets tax free to their partner. As a couple, they can also combine their tax free allowances and residence-nil rate allowances. This means if they pass on a main home to a child or grandchild, the recipients receive up to £1 million without paying a penny of Inheritance Tax.

How can I prevent my children paying Inheritance Tax?

Whilst you can’t prevent your children paying Inheritance Tax if it is owed, you can ensure that you are making the most of the gifts, allowances and exemptions that are available in the UK. These provide legal loopholes to make sure your Inheritance Tax bill doesn’t put pressure on your children.

As of 2026, the nil rate band of £325,000 has been frozen until at least 2030, meaning more estates will be shifted above the nil rate band threshold, increasing Inheritance Tax bills all round.

That’s why it’s important to be as efficient as possible when looking at reducing the amount of IHT that will need to be paid. 

While a well planned estate is key, to avoid your children footing a large Inheritance Tax bill, you can also:

Use the 7-year rule

If you gift an asset, of any value, more than 7 years before your death, it will not be included in the Inheritance Tax bill. Even if this doesn’t happen, within 3 years of gifting the amount of IHT due on gifts decreases. This is called taper relief:

• 3-4 years: 32% IHT rate charged
• 4-5 years: 24% IHT rate charged
• 5-6 years: 16% IHT rate charged
• 6-7 years: 8% IHT rate charged

Gifting

There are a few ways to gift money tax-free which mean you can pass on parts of your estate and bring down your IHT bill.

Annual tax-free allowance: Every person has a £3,000 annual tax-free gifting allowance. It can be gifted to one person or split between a few and you can carry the allowance forward into the next year if you don’t use it. 

Small gifts: You can gift an unlimited amount of small gifts – up to £250 – per person per year. While a great way to share your estate, it is considered a stand alone gift and cannot be combined with any other form of gifting.

Wedding gifts: Gifts given for those getting married or entering into a civil partnership are tax-free. And, the good news is, you can combine a wedding gift with your annual tax-free allowance. So you can give:

• Up to £5,000 to a child
• Up to £2,5000 to a grandchild or great grandchild
• Up to £1,000 to anyone else

Gifts to charity: If you give money to a registered charity, no IHT will apply, lowering the Inheritance Tax bill on your estate. Plus, if you leave more than 10% of the total value of your estate to charity, your overall IHT rate falls from 40% to 36%.

Gifts from income: As long as your standard of living is not affected, you can set up a gift that will be classified as normal spending. An example is contributing to a savings pot for your child. It must come from income, so you cannot withdraw from your savings or investments.

Even with all of the exemptions considered, executors can still struggle to find the funds to cover an Inheritance Tax bill.

Our Estate Advance can help lift this weight.

It promises:

• Up to 50% of the total net value of the estate within days
• No monthly repayments, it is paid back in full when funds are released from the estate
• Only to charge simple interest, not compound interest
• To handle all HMRC payments directly
• A dedicated, supportive member of our team to guide you through the process.

Plus, you assume no personal liability for the loan. 

Fill out our form today to discuss your options with our team.

Can you avoid Inheritance Tax with a trust?

A trust can be a great financial tool for avoiding Inheritance Tax. This is because when you place assets in a trust, they are no longer considered part of your estate and they become exempt from IHT. Doing this does fall under the 7-year rule, so planning ahead is vital to benefit fully. 

Once assets are in a trust, they are managed by an external trustee or group of trustees on behalf of whoever will receive the money in the future. 

We always advise taking expert legal guidance when placing assets in a trust as they have their own limitations and tax charges to be aware of.

How Provira can help with Inheritance Tax

Paying off Inheritance Tax can prove a huge obstacle when you’re dealing with an estate. 

At Provira, we meet executors struggling to work out how to pay off their Inheritance Tax every day, even if they hadn’t predicted any problems. 

If you’re facing an Inheritance Tax bill and don’t have the cash to pay it, you have options.

Our Estate Advance:

• Gives access to up to 50% of the net value of the estate, within days
• Charges simple interest, not compound interest
• Asks for no personal liability
• Takes HMRC payments off your hands
• Doesn’t request monthly repayments, the full amount is repaid in full once the estate has been settled

Leaving executors the time and space to focus on more important things. 

To find out if you’re eligible, apply today. It only takes a few minutes.