Don't invest unless you're prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong. Take 2 mins to learn more.
When it comes to inheritance tax (IHT), the standard advice often revolves around simple gifts and basic trusts. But for the super rich, that's just scratching the surface. They play a different game entirely, using a playbook of sophisticated, scalable strategies designed to preserve generational wealth while often maintaining control of their assets.
Inheritance tax receipts have been on an upward trend for many years now. More and more households are finding themselves liable, thanks to a combination of frozen tax thresholds, rising asset values, and planned government reforms. Now is the time to take a look at the strategies available to minimise the inheritance tax you pay..
Forget waiting seven years for a gift to become tax-free. The preferred methods are faster, more dynamic, and integrated into their investment portfolios. Here’s how they do it.
This is the absolute cornerstone of serious IHT planning. Business Property Relief (BPR) allows qualifying assets to be passed on 100% free of inheritance tax, (although there will be a threshold introduced as of April 2026, which will reduce the relief to 50% on amounts over £1m). The crucial part? The holding period is just two years. This speed and certainty make it the go-to strategy for those wanting to shelter significant capital without locking it away or losing control.
The wealthy don't just see this as a tax loophole; they see it as a government incentive to drive investment into UK businesses. Here are their two favourite ways to use it:
The Alternative Investment Market (AIM) is packed with growing companies that qualify for BR. The super rich don't just buy a few random shares; they instruct wealth managers to build dedicated AIM IHT portfolios. These are managed portfolios consisting entirely of BR-qualifying stocks.
Why it’s the top choice:
Control: The money remains yours and is invested in the stock market, with the potential for capital growth. You can liquidate the portfolio if you need the cash (though this would restart the IHT clock).
Speed: Assets become IHT-exempt after just two years, far better than the seven-year wait on gifts.
For those with a higher risk appetite, the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) are powerful tools. Shares in companies that are EIS and SEIS-qualifying also qualify for BR, meaning a two-year holding period for IHT exemption.
The real appeal for wealthy investors is the stacked tax benefits. They get upfront income tax relief (30% for EIS, 50% for SEIS), tax-free growth, and loss relief if a company fails. This combination de-risks the investment significantly. They access these through specialised funds that build a portfolio of promising start-ups.
The Angel Academe EIS Fund, for example, is popular because it targets high-growth, female-founded tech companies—a sector many savvy investors believe is undervalued.
Similarly, funds like the Carbon13 SEIS Fund attract capital from those wanting to invest in climate tech, combining huge tax breaks with an environmental impact focus.
This isn't just about avoiding tax; it's about getting into potentially explosive growth companies at ground level.
While BR is the power play, gifting and trusts are the foundational moves made early on. The super rich don't just use their £3,000 annual exemption.
They make substantial 'potentially exempt transfers', large cash gifts, often of hundreds of thousands or millions, to their children to start the seven-year clock as early as possible.
More importantly, they use trusts. A trust isn't just for avoiding tax. It’s a mechanism for control. By placing assets in a trust, they can dictate how and when their heirs receive the wealth, protecting it from divorce settlements, creditors, or irresponsible spending for generations to come. They use expert lawyers to create bespoke trust structures that lock in family wealth for decades.
In essence, the strategy is a two-pronged attack: move significant wealth out of the estate early using trusts and gifts, then shield the remaining liquid wealth with a fast-acting, investment-based BPR strategy that keeps the capital working for them.
Please note: our office hours are weekdays, 9.30am - 5.30pm.
