The UK’s inheritance tax (IHT) system continues to bring in record revenues for HM Revenue and Customs (HMRC), with recent figures revealing a staggering £7 billion collected in the first ten months of the 2024/25 financial year. This marks an increase of £639 million compared to the previous year, largely due to families unknowingly paying higher taxes on estates.
Experts warn that one overlooked document—a legally valid will—could be costing families thousands in unnecessary IHT payments.
Why the Lack of a Will Could Cost Your Family Thousands
A will is one of the most important financial documents an individual can create. It ensures that assets, including property, savings, and personal belongings, are distributed according to the deceased’s wishes. Without a valid will, the estate is subject to intestacy laws, which may not align with family expectations and often lead to higher inheritance tax bills.
Shockingly, over half of UK adults do not have a will, according to research by Canada Life. Additionally, 13% of people aged 55 and over have no intention of writing one, despite their age group being the most affected by inheritance tax regulations.
Understanding Inheritance Tax (IHT) and How It Works
Inheritance tax applies to estates valued above £325,000, with any amount over this threshold taxed at 40%. However, if an individual leaves their main residence to their children (including stepchildren, foster, and adopted children), their tax-free threshold can increase to £500,000.
For married couples and civil partners, any unused allowance can be transferred to the surviving partner, allowing a combined estate value of £1 million before IHT is applied.
How Overlooking a Will Can Lead to Higher Taxes
Failing to create a will means an individual’s estate is handled according to UK intestacy laws, which dictate that assets are distributed to specific family members in a set order. This can result in:
- Assets going to unintended recipients – If you die without a will, your estate will be divided based on intestacy rules, which may not reflect your actual wishes.
- Higher tax burdens – Without estate planning strategies such as gifting or trusts, more of the estate could be subject to the 40% IHT rate.
- Legal disputes – Family members may contest the distribution of assets, leading to prolonged and costly court battles.
Free Wills Month: A Chance to Protect Your Estate
To encourage will-making, March 2025 has been designated as Free Wills Month, offering individuals aged 55 and over the opportunity to create or update a will at no cost through participating solicitors.
This initiative aims to reduce the number of individuals without a will and prevent unnecessary tax payments by ensuring estates are structured efficiently. Those taking part in the program can:
- Ensure their assets go to their chosen beneficiaries
- Take advantage of legal tax-saving strategies
- Minimize the risk of legal disputes over inheritance
Ways to Reduce Your Inheritance Tax Liability
Beyond writing a will, there are several ways to legally minimize IHT liability:
1. Gifting Assets Before Death
Individuals can gift up to £3,000 annually tax-free. Any additional gifts may be exempt from IHT if the donor survives for seven years after making the gift.
2. Setting Up a Trust
Trusts allow individuals to transfer assets outside of their estate while still providing for family members, potentially reducing tax exposure.
3. Donating to Charity
Leaving 10% or more of an estate to charity can reduce the IHT rate from 40% to 36%.
4. Taking Out Life Insurance
A life insurance policy placed in a trust can provide funds to cover inheritance tax liabilities without increasing the taxable estate value.
Expert Warnings and Public Concern
Financial experts continue to stress the importance of having an up-to-date will. Andrea Rozario, Chief Corporate Officer at Bower Home Finance, highlights the risks:
“If your wishes aren’t written down in a legally binding document, this can complicate the inheritance process and even result in a higher tax payment. A lot of people make the crucial mistake of overlooking the implications of not having one.”
With inheritance tax receipts rising sharply and thousands of families facing unnecessary financial burdens, taking proactive estate planning steps is more critical than ever.
Final Thoughts
The rise in HMRC’s inheritance tax receipts highlights the need for careful estate planning. Failing to write a legally valid will could result in increased tax bills and unintended financial consequences for your loved ones.
With Free Wills Month providing an opportunity for those aged 55+ to draft a will at no cost, now is the ideal time to take action. Estate planning not only ensures financial security for your family but also helps reduce unnecessary inheritance tax payments.
This article has been carefully fact-checked by our editorial team to ensure accuracy and eliminate any misleading information. We are committed to maintaining the highest standards of integrity in our content.
A senior at Yale-NUS College with interests in developmental and labour economics, as well as creative non-fiction and poetry. Currently, I’m studying as an Economics major and an Arts and Humanities minor (focusing on Creative Writing) with heavy involvement in the Singaporean journalism scene and involved in research on economic history and educational policy. I’m working as an author for SKC News, Yale-NUS’ student publication, as a writer for Wingspan, Yale-NUS’ alumni magazine, and as a tutor for the NUS Libraries Writer’s Centre. | Linkedin