What IHT is, how it is calculated, and how trusts and SPV structures can help protect London property wealth for international families.
UK Inheritance Tax: Wealth Protection Guide 2026
You bought a £3,000,000 property in London. In 20 years it may be worth £6,000,000. What reaches your children when you die?
Without planning, the state takes a substantial share. This guide explains IHT (Inheritance Tax) and lawful protection routes.
What Is IHT? (Inheritance Tax)
IHT is tax on assets transferred on death. Rates in England are far higher than comparable Turkish exposure.
2026 IHT Rates and Thresholds
| Band | Rate | |---|---| | £0 – £325,000 (nil rate band) | 0% | | Above £325,000 | 40% |
Additional relief — Residence Nil Rate Band (RNRB): Leaving a main residence to direct descendants adds £175,000 relief. Total per person: £500,000.
Married couples: transfers between spouses are IHT-free; combined nil bands can reach £1,000,000.
Does Turkish Residence Matter?
Yes — but differently than many assume. Owning London property is enough: IHT applies to UK-sited assets even if you live abroad.
Critical point: Non-Dom status ended in 2025. Former planning routes have largely closed.
Worked Example
£4,000,000 Knightsbridge flat left to two children:
| Item | Amount | |---|---| | Property value | £4,000,000 | | Nil rate band | -£325,000 | | RNRB (home to children) | -£175,000 | | Taxable estate | £3,500,000 | | IHT at 40% | £1,400,000 | | Net to children | £2,600,000 |
Without planning: £1.4M in tax.
Ways to Reduce IHT
1. Trust Structure
A trust transfers legal ownership to a trustee (who manages assets) for beneficiaries (e.g. children, grandchildren).
Under a discretionary trust (subject to conditions):
- Assets may fall outside the estate calculation
- Trustees distribute flexibly among beneficiaries
- Sale proceeds can remain protected
Caution: Trust setup is complex — specialist tax adviser and solicitor required.
2. Holding Property Through an SPV
Property in an SPV may be treated differently for IHT. In some structures BPR (Business Property Relief) may apply — partial or full exemption.
BPR requires genuine trading activity; empty holding companies do not qualify.
3. Lifetime Gifts
Transferring wealth before death can reduce IHT:
| Time Since Gift | IHT Treatment | |---|---| | 0–3 years | Full IHT (40%) | | 3–7 years | Taper relief (8–32%) | | After 7 years | Zero IHT |
Known as the seven-year rule.
4. Life Insurance in Trust
A policy written in trust can pay the IHT bill on death — avoiding forced sale of the property.
Practical Succession Framework
For Turkish investors owning London property:
- Hold via SPV — flexibility for IHT and CGT planning
- Prepare POA — easier management from Turkey
- Consider a discretionary trust — long-term succession
- Start transfers early — use the seven-year rule
- Annual review — legislation changes; plans must keep pace
Professional Advice Is Essential
This article is general information. IHT planning depends on residence, asset structure, and family circumstances.
Brick & Fortune introduces clients to London-based tax advisers for IHT work.
Enquiries: +44 7990 38 1102 | investinlondon.com.tr