The following client stories are blended ones, based on common experiences across multiple clients. Details have been combined and modified to protect confidentiality while accurately representing typical outcomes. 

Real Families, Real Planning: How Others Reduced Their Inheritance Tax Bill 

When it comes to Inheritance Tax (IHT) planning, nothing brings clarity like examples based on real-life situations. At Flying Colours Advice, we’ve worked with hundreds of families to help them reduce (and in some cases avoid) large IHT bills. 

The three stories below are based on typical scenarios that we’ve advised on. Each one highlights a different approach to family wealth planning, from gifting and life insurance to trust structures and Business Relief. 

And while every case is different, one thing remains the same: the sooner you start planning, the more you can protect. 

Sarah’s Story: How She Avoided a Potential £320,000 Inheritance Tax Mistake 

Sarah was a successful business owner who had built a £1.2 million estate. She had always been told that pensions were tax-efficient, so her retirement plan was built around leaving her pension untouched and passing it on to her children. 

But Sarah needed to adapt this plan as, from April 2027, flexible pensions will no longer be exempt from Inheritance Tax. Her pension pot, that was going to pass to her family outside of her estate originally, was now going to cost her family an estimated £320,000 in inheritance tax. 

Luckily, Sarah reached out in time. We helped her rework her estate plan to reflect the upcoming rules, including using a life insurance policy written in trust to cover the future IHT bill and alongside a gifting and exemption strategy. Now we’re likely to preserve the full value of her pension for her children. 

Why it worked:

By reviewing the structure of her pension and recognising the shift in legislation due in April 2027, we were able to help her adapt in good time.  

Setting up a life insurance policy written in trust will allow her to offset the anticipated IHT bill with tax-free proceeds, ensuring the maximum benefit is maintained for her children.  

This approach ensured we adapted to the new tax landscape, changing the withdrawal strategy and adding a layer of protection. 

Robert’s Story: Why Outdated Assumptions Could Prove Costly

Robert, 72, had already done some planning. He’d taken out life insurance, made a few gifts, and ensured his and his wife’s assets were fairly balanced. With a £1.4 million estate, he assumed they were in a safe position, but assumptions don’t always hold up. 

Robert hadn’t accounted for the long-term effects of frozen thresholds and upcoming pension tax changes. Once we modelled his future liability, including potential income tax and IHT on inherited pensions, it was clear his estate could be facing a much larger tax bill than expected. 

Working together, we put a clearer strategy in place. This included revisiting his gifting allowances, recommending Business Relief investments for part of the estate, and reviewing his pension structure to avoid a double taxation hit.

Why it worked:

Robert had done some foundation estate planning, but it hadn’t been reviewed for several years. Our estate modelling process showed that the combination of frozen thresholds, growing property values, and changes to pension tax treatment meant his potential Inheritance Tax bill was much higher than he thought it would be.  

As he was prepared to take a higher level of risk, we recommended Business Relief (BR) investments. These can qualify for 100% IHT relief after two years—from 2026, BR receives 100% IHT relief up to £1 million, and any amount over receives 50% IHT relief. We also rebalanced how his assets were held and gifted and created a plan that not only reduced his exposure but gave him the confidence that his legacy would be passed on as intended. 

Patricia’s Story: The Importance of Managing Trusts Properly

Patricia had established a loan trust valued at £500,000 with the intention of reducing the size of her estate and, in turn, her Inheritance Tax (IHT) liability. She believed the arrangement was quietly working in the background to lower her tax exposure. However, the loan remained part of her estate and had not achieved the intended reduction. Her strategy wasn’t flawed; it was simply unfinished. 

With a loan trust, the original loan (capital invested into the trust) remains part of her estate and subject to IHT. However, any growth on the investment would fall outside the estate. Patricia retains full access to the original loan amount and can request repayments at any time, either in full or in part. 

As Patricia entered later retirement, it became evident that she no longer needed access to the loaned funds. With a loan trust, if you find that you no longer need access to the original capital, you can begin waiving portions of the loan. This means formally giving up your right to the repayment of those amounts, effectively turning them into gifts to the trust. Any waived amounts are treated as lifetime gifts for inheritance tax purposes. The annual gift exemption—currently £3,000 per year—can be used to waive small amounts tax-free. For larger waivers (gifts), the seven-year rule applies: if you survive seven years from the date of the waiver, the amount falls entirely outside your estate. This strategy allows gradual a reduction in your taxable estate whilst the trust still benefits from any investment growth. 

As part of the estate planning strategy, we recommended reducing the value of her estate over time by using annual gift allowances and waiving a substantial amount of the loan upfront. To safeguard against any potential Inheritance Tax liability, should she pass away within seven years of making the substantial gift, we also recommended a modest life insurance policy to cover the tax exposure during the gifting period. By combining loan waivers with strategic insurance planning, Patricia was able evolve her existing trust into a powerful tool for IHT mitigation. This strategic adjustment—at minimal cost—resulted in significant potential inheritance tax savings. 

Why it worked:

Patricia’s structure was sound, but like many trust arrangements, it needed ongoing attention to work effectively. Her needs had changed but her strategy hadn’t. 

We identified that the loan she had made to the trust was still sitting in her estate, inflating the estate’s value more than necessary and negating the intended tax benefits.  

Why Planning Early Makes All the Difference

If there’s one thing these families have in common, it’s this: they didn’t wait. 

Each case shows the value of early, tailored Inheritance Tax planning advice, not just generic guidance or a one-size-fits-all solution. Whether it’s adjusting for incoming pension rules, managing trusts correctly, gifting, or making proper use of Business Relief, where suitable, the best results come when you get advice, understand your options, and act in time. 

At Flying Colours, we guide you through every step, starting with a complete estate assessment and finishing with a fully implemented plan designed around your life and long-term goals. You can find out how our inheritance tax and estate planning service works and what it could mean for your family. 

Not sure where you stand right now? Try our Inheritance Tax Calculator to estimate your estate’s potential liability and get a clearer picture of what your family could face. 

Then, book a free, no-obligation consultation call to explore your options and get tailored guidance from an expert. 

The sooner you act, the more choices you have to preserve your wealth for the people who matter most. 

Please note: 

This article is for general information only and does not constitute advice. The information is aimed at retail clients only. The examples are based on typical client situations that we have advised on in recent months. 

All information is correct at the time of writing and is subject to change in the future. 

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term (minimum of 5 years) and should fit in with your overall risk profile and financial circumstances. 

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 

The Financial Conduct Authority does not regulate estate planning, tax planning, trusts, or Will writing. 

Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse. Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.