Nobody sets out to make a mistake with inheritance tax. The problem is that IHT is one of those things most people don't think about until it's too late — or until the bill lands on their family's doorstep.
After working with property investors for years, we see the same mistakes come up again and again. None of them are complicated. None of them are anyone's fault. But all of them are avoidable — if you know what to look for.
Here are the five biggest ones.
1. Assuming Business Property Relief will apply to your property company
This is the most common — and the most costly — misunderstanding we come across.
Business Property Relief (BPR) is a powerful IHT relief that can reduce the value of business assets in your estate by up to 100%. If you run a trading business — a consultancy, a manufacturing firm, a chain of restaurants — your shares might well qualify. It's one of the most generous reliefs in UK tax law.
But here's the catch: property investment companies don't qualify.
HMRC draws a clear line between trading businesses and investment holding companies. A company that holds properties and collects rent is, in their eyes, an investment business. It doesn't matter how actively you manage the properties. It doesn't matter how many you have. If the main activity is holding investments, BPR doesn't apply.
Martin runs a property company with 12 buy-to-lets worth £1.8m. He manages them himself, deals with tenants, arranges maintenance — it feels like a full-time job. He assumed BPR would apply because he's clearly "running a business."
It won't. HMRC looks at what the company does, not how hard the owner works. The company holds investment properties. No BPR. His shares — worth roughly £1.1m after mortgages — sit fully exposed to 40% IHT.
This one trips people up because it feels unfair. And honestly, there's an argument that it is. But the rules are the rules, and planning around them is far better than being surprised by them.
2. Thinking "my accountant would have told me"
Your accountant is almost certainly very good at what they do. They handle your annual accounts, your tax returns, your VAT, your corporation tax. They keep you compliant and they save you money every year.
But here's the thing: most accountants focus on annual tax. Income tax. Corporation tax. Capital gains. These are the taxes that happen every year, and they're what you're paying your accountant to manage.
Inheritance tax is different. It's not an annual event. It's a one-off liability that crystallises on death. It sits in a different part of the tax world — the part that overlaps with financial planning, estate planning, and trusts. Many accountants don't work in that area day-to-day, and it's not something that naturally comes up in your annual accounts meeting.
This isn't a criticism of accountants. It's just a recognition that IHT planning is a different discipline. Your accountant made the right call on incorporating for income tax. The IHT piece is a separate conversation — and it's one that usually needs a different kind of adviser.
A useful question to ask yourself: Has anyone ever sat down with you and calculated what your family would actually owe in inheritance tax based on your current structure? If the answer is no, that's the gap.
3. Waiting until retirement to start planning
This one is completely understandable. When you're busy building a portfolio, dealing with tenants, and growing your business, estate planning feels like something for "later." You'll deal with it when things calm down. When you retire. When you're older.
The problem is that many of the most effective IHT strategies depend on time. Specifically, the seven-year rule.
Under UK tax law, if you make a gift and survive for seven years, that gift falls completely out of your estate for IHT purposes. It's one of the simplest and most powerful tools available. But it only works if you start early enough.
Karen is 55 and owns a property company worth £1.4m. If she starts restructuring now, she has time for gifts to fall outside the seven-year window well before she reaches her 70s or 80s.
Her neighbour Brian is 68. He has a similar company, but he's only just started thinking about IHT. If he makes the same moves today, he needs to survive until 75 for them to take full effect. The window is tighter, the options are fewer, and the risk is higher.
Karen's early start doesn't cost more — but it buys her significantly more flexibility.
Starting at 55 doesn't mean you have to do anything dramatic. It just means you have more options — and more time for those options to work.
4. Leaving everything to your spouse and thinking that solves it
There's a common belief that leaving everything to your husband or wife avoids inheritance tax. And technically, that's true — transfers between spouses are exempt from IHT. No tax is due on the first death.
But that's not the end of the story. It's not even close.
What the spouse exemption actually does is delay the tax bill. It doesn't eliminate it. When the surviving spouse eventually dies, the entire estate — now including everything from both partners — is assessed for IHT.
Peter and Anne have a combined estate of £2.2m, including a property company. Peter dies first and leaves everything to Anne. No IHT is due — the spouse exemption covers it.
Five years later, Anne dies. Her estate is now the full £2.2m. After using both sets of nil rate bands (£1m total), the remaining £1.2m is taxed at 40%.
IHT bill: £480,000.
If Peter and Anne had structured things differently during their lifetimes — perhaps using trusts, share restructuring, or lifetime gifts — that bill could have been significantly reduced. But by the time Anne dies, many of those options have gone.
The spouse exemption is useful, but it's a deferral, not a solution. Relying on it alone means the full bill lands on your children — often at the worst possible time.
5. Assuming it's too complicated or too expensive to fix
This is the one that makes us most frustrated, because it's the mistake that stops people from doing anything at all.
"It's probably really complicated." "I'd need expensive lawyers." "It would take months to sort out." "I don't even know where to start."
We hear all of these. And we understand why people feel that way — inheritance tax and estate planning can sound intimidating. The language is dense, the rules seem opaque, and nobody wants to get it wrong.
But in practice, for most property company owners, the restructuring process is more straightforward than you'd expect. It typically involves:
- Understanding your current exposure (a simple calculation)
- Looking at your options (there are usually two or three realistic approaches)
- Implementing the chosen structure (often a one-off process)
- Documenting everything properly for HMRC
It's not a never-ending project. It's a defined piece of work with a clear outcome. And the cost of doing it is a fraction of the tax bill it's designed to prevent.
Put it this way: If someone told you that a one-off piece of planning could save your family £200,000 or more in tax, would you at least want to know the details? That's really all we're suggesting — have the conversation, understand the numbers, and then decide.
The common thread
All five of these mistakes share something in common: they're not about doing the wrong thing. They're about not doing anything. Assuming someone else has it covered. Assuming there's plenty of time. Assuming it's too hard.
The reality is that IHT planning for property company owners is well-understood, well-established, and — once you know the numbers — usually feels like an obvious thing to do. The hardest part is starting the conversation.
Not sure if any of this applies to you?
A quick conversation is all it takes to find out. We'll look at your situation, run the numbers, and tell you honestly whether there's anything worth doing. No jargon, no pressure.
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