I'M 64 AND WILL GET A £98,000 INHERITANCE TAX BILL FOR BEING SINGLE, BUT A COUPLE COULD PAY NOTHING

I'm a 64-year-old single woman with no children, and I'm hoping to protect my estate so that I can leave some to my four brothers  and I also have five nephews, one great nephew and one great niece.

My mum is 92 and still alive, so she is also included in my beneficiaries.

I don't have a huge amount, my flat is worth £500,000 and I have savings of around £70,000. As it stands I would face a big inheritance tax bill, but a married couple in my position would not.

I am taking my personal pensions, one of which is final salary and will pay out until the day I die. I am due to draw my state pension on 1st September 2028 on my 67th birthday, HMRC recently sent a letter confirming this. I work one day a week in an estate agents for fun and to keep my mind active.

All the advice I seem to read about only covers married or cohabitating couples and people with children. 

I do feel my situation should be straightforward. All I want is to make sure I'm not going to pay tax over and above what I've already paid to live and buy my property.

My inheritance tax threshold is just £325,000 and I cannot use the £175,000 residence nil rate band, as I have no direct descendants. It seems I'm penalised for not having children and not marrying, as the rest of the money will be taxed at 40 per cent.

I'm not trying to avoid paying tax as I've paid it all my life, but I do want to protect my assets as much as possible as a single woman, with no children who would like to leave it to my family. C.R, via email

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Harvey Dorset, of This is Money, replies: You won't be the first person to feel hard done by when it comes to inheritance tax rules but single, childless people get dealt an even worse hand that others.

As you rightly say, the fact that you aren't married and don't have children means that you aren't able to benefit from the same allowances as others.

Where married couples can qualify for join inheritance tax allowances up to £1million, benefitting from combined standard IHT allowances and residence nil rate bands, in your case you can only pass on up to £325,000 tax-free.

While you don't have a partner or children to pass your wealth onto, you still have many family members who you want to see benefit but have to contend with a fair chunk going to the taxman.

There are options open to you, however, to reduce the future tax bill on your estate. This is Money spoke to a financial adviser to find out what people like you should consider.

Alex Gaita, a financial planning director at Schroders Personal Wealth, replies: At nearly 64, you are in a strong financial position. You own a flat worth £500,000, have £70,000 in savings, and receive income from a final salary pension. 

You'll also begin drawing your state pension at 67. 

With no children and a desire to leave your estate to your brothers, nieces, and nephews, you're right to be thinking about how best to protect and pass on your assets.

But before making any decisions, it's important to remember that the primary role of your wealth is to support your own future. As a single woman with no dependents, your financial plan must prioritise flexibility and independence.

Without a partner or children to lean on, you'll need to ensure your finances can adapt to changes in health, housing, or lifestyle. This could vary from helping around the home or the potential cost of long-term care.

Your estate, currently valued at £570,000, exceeds the standard inheritance tax threshold of £325,000. Because you have no direct descendants, you don't qualify for the additional residence nil-rate band. That means £245,000 of your estate could be taxed at 40 per cent, resulting in a potential IHT bill of £98,000.

There are, however, several ways you could reduce this liability while maintaining control over your finances.

If your income comfortably covers your living costs, you might consider making regular gifts from surplus income. These can be exempt from IHT if they meet certain criteria and they offer the flexibility to stop or adjust if your circumstances change.

Another option is a whole-of-life insurance policy written in trust, designed to cover the IHT bill. This can be a useful tool, but it's a long-term commitment. You would need to be confident that the premiums will remain affordable, even as your needs evolve.

A well-drafted will is essential. It ensures your estate is distributed exactly as you intend and can be updated as your situation changes. 

It's also worth setting up lasting powers of attorney for both health and finances. These allow trusted family members to step in if you ever become unable to manage your affairs. 

It's important to note that having those conversations early can make things much easier later on.

While you've ruled out equity release and are reluctant to move, it's sensible to keep an open mind. If your needs change in the future, downsizing or releasing equity could provide additional flexibility.

So, understanding how much income you have available after covering your day-to-day expenses is a crucial first step. Many advisers use cash flow modelling to help clients visualise how their finances might evolve over time.

This approach could allow you to explore different scenarios factoring in inflation, rising living costs, and potential future needs so she can make informed decisions about gifting or taking out insurance while ensuring your estate planning doesn't compromise long-term financial security.

Ultimately, your position as a single person gives you more freedom to plan on your own terms. With thoughtful, tailored advice, you could protect your financial independence and leave a meaningful legacy to the people who matter most.

Charlotte de Vries, director of wealth management firm EXE Capital Management, replies: Your priority of passing on as much as you can to your siblings, nephews and nieces, and of paying as little inheritance tax as possible, is one we see all the time.

Whilst the UK still maintains the current IHT regime, which actually raises little compared to other taxes such as income or corporation tax and VAT, it is understandable that you want to protect your hard-earned assets and pass on as much as you can to those closest to you. 

After all, you've paid taxes your whole life, and leaving a meaningful legacy to your beneficiaries is a reward for all your hard work.

From what I can see, you seem to be in a good financial position. Your pension and work income appear sufficient to meet your needs – and your state pension, which is due when you are 67, will provide a further boost.

It sounds like you love where you live and don't want to move away from your friends, so relocating could diminish your quality of life. With a strong cash reserve to cover unexpected expenses, you are well-positioned financially. It may be that, once you start drawing your state pension, you'll have some extra money to consider.

I wouldn't advise equity release, as you don't need additional income. Likewise, selling your home to downsize purely to raise cash for gifting could prove counterproductive once the costs and potential upheaval are factored in. 

Enjoy the benefits of what you have worked for, spending time with family and friends where you feel happiest.

You could consider using annual gifting allowances if you can afford to do so out of what you normally spend. You can give £3,000 per tax year (which will reduce your IHT liability, as it will be exempt from tax), along with small gifts of up to £250 per person, regular payments, and gifts for birthdays and Christmas.

These gifts can provide meaningful help to your nephews and nieces for day-to-day expenses, larger purchases and even their own savings, without affecting your financial comfort. 

Although these allowances will not remove a large portion of your IHT liability, they allow your family to benefit now – and for you to see that benefit first-hand.

I would add that you should check the HMRC gifting rules, as you do not want to duplicate allowances on gifts to the same person where this is not permitted.

Before you gift money away, it is important to think about yourself and what you may need in the future. Factor in potential future care costs, which can be substantial, for instance. Maintaining your cash reserves and the flexibility to sell your property later if needed will provide security. The same principle applies to everyone, married or otherwise: ensure your own needs are fully covered before making significant gifts.

Your total assets are approximately £570,000 (excluding your personal pension, currently exempt from IHT but expected to fall within your estate from April 2027). After deducting the nil rate band of £325,000 – note the residence nil rate band does not apply as your beneficiaries are not direct descendants – the remaining £245,000 would be taxed at 40 per cent, resulting in a £98,000 IHT liability.

I know this is a lot of money, but it means that 83 per cent of your estate will still go to your beneficiaries and only 17 per cent to the taxman.

In short, look after yourself first, make affordable gifts within allowances and buy the first round of drinks! Remember, every pound you spend is 40 pence that HMRC won't receive.

2025-12-02T12:05:16Z