Recent Inheritance Tax reforms in the UK are adding an ever increasing burden on those high net worth individuals who are concerned with long-term strategies for preserving their legacy.
As Firenze we believe that portfolio lending is a powerful tool that investors can use to optimise estate planning in this shifting landscape. A well-structured Lombard lending solution can help borrowers retain flexibility, helping to manage the IHT exposure that is being increasingly felt by many.
What’s Changing in UK Inheritance Tax (IHT) & Why It Matters
Unused Pension funds
One of the biggest reforms on the horizon is the inclusion of most unused pension funds and death benefits in discretionary pension schemes within the deceased’s estate for IHT purposes. Currently, many pension schemes can pass on unused benefits without IHT, but this will change from April 2027.
Large estate cap
Business Property Relief (BPR) and Agricultural Property Relief (APR), which have been used to allow large estates to pass businesses or farmland almost tax-free, are being constrained: from April 2026.
Only the first £1 million of combined agricultural or business property qualifies without additional IHT, with assets exceeding that taxed at 20% relief.
Residence-Based IHT, Not Just Domicile
The rules are moving more towards residence-based tax for non-UK assets, reducing the old reliance on domicile status. Once you have been UK tax resident for a certain number of years (e.g. long-term residence), more overseas assets may come into the IHT net.
The Main Implications for IHT Planning
These changes mean that:
- Estates that previously assumed pensions were safe from IHT will need to re-think that position.
- More of a family’s wealth—properties, business interests, investments—may push the existing estate over tax thresholds.
- Liquidity becomes an issue: heirs might be forced to sell assets at inopportune times in order to pay the increased tax burden.
- Planning becomes more complex: trusts, wills, pension nominations, and gifting strategies will need reviewing, prompting the need for different solutions, such as Lombard Lending.
Quick Recap: What Is Lombard Lending?
Before discussing how Lombard Lending could help, a quick recap:
- Lombard Lending (or Lombard Credit) is where you pledge part of your investment portfolio (shares, funds, bonds etc.) as collateral to borrow, while leaving the rest of the portfolio invested and performing.
- A way to access liquidity without having to sell assets.
- Because the portfolio continues its growth potential, you retain tax benefits tied to those assets (e.g. capital growth, dividends, tax wrappers like ISAs)
At Firenze, we believe combining traditional lending with innovative technology allows advisors and wealth managers to deliver Lombard lending solutions that are responsive to the changing needs of borrowers.
How Lombard Lending Helps Estate Planning in the New IHT Environment
Here are several ways Lombard Lending can potentially be utilised as part of the IHT planning toolkit
Gifting and IHT Management
As pension assets are brought within an individual’s estate, decisions on gifting strategy are being brought forward. The key trade off in any gifting strategy, however, is always that there can be no access to any benefits of the gift once made.
Lombard lending can help support a middle ground. Taking out a Lombard loan against assets then gifting the proceeds to beneficiaries can serve multiple purposes. The gift is, subject to surviving years, outside of the estate but the loan remains in the clients name and thus reduces the net asset value of the estate (and consequently the level of IHT paid) whilst still allowing them to benefit from the assets themselves should they need to.
Wrapper & Structure Flexibility
On the back of the pension changes, offshore bonds and Family Investment Companies are enjoying extra momentum as part of estate planning toolkit.
However, a key concern of clients holding wealth in an offshore bond is that they may need more than their 5% withdrawal cap.
Here, Lombard lending can also potentially help. Whilst any lending secured against an offshore bond needs to be carefully considered and analysed, allowing the client to leverage a loan if unexpected liquidity is required could potentially be considered as part of the decision-making process.
Similarly, lending typically plays an important role in the set-up and management of FICs. Where loans are taken out inside a corporate structure, the cost of debt can be potentially reduced by 19-25%, as the interest payments are expected to be deductible expenses for corporation tax purposes.
Estate Equalisation
If there is a desire to leave different assets to different heirs (e.g. property, business shares, investments) but worry that some heirs might get less value due to IHT or liquidity constraints, a Lombard loan can help equalise without selling off favoured assets. For example, making advance loans or gifts financed by collateralised borrowing can give heirs access whilst being potentially exempt from IHT (if sufficient time has elapsed).
Considerations and Risks of Lombard Lending for IHT planning
Of course, Lombard lending requires consideration. Be sure to speak to a wealth manager or financial adviser to ensure you are fully aware of the risks and can judge whether a Lombard loan is right for you.
- Market risk – the risk that investment values may fall triggering a margin call, requiring extra capital or investments to be sold.
- Interest rate risk – the risk that interest rates increase, raising the cost of monthly interest payments.
- Liquidity risk – the risk further liquidity is needed in the account to maintain the loan-to-value ratio. Extra capital would be required from a source other than the loan.
- Tax risk – the risk that selling investments from within a tax-efficient wrapper may cause the tax benefits to be invalidated.
To ensure regulatory & tax compliance, everything must align with HMRC requirements and FCA rules. We emphasise that our role at Firenze is not to provide specific investment or tax advice to public individuals without proper advice arrangements. But we can assist wealth managers and advisors in modelling the options.
Finally, ensure that your estate and succession documentation are consistent: wills, trusts, pension nominations, power of attorney. Loans and borrowing structures need to integrate well with these, otherwise there may be unintended tax or legal consequences.
Practical Steps for IHT Planning Success
Why Firenze Is Uniquely Positioned to Help
At Firenze, we recognise the complexity high net worth individuals face.
We combine:
- Access to Lombard Credit facilities built for borrowers who want to preserve investment growth while accessing liquidity.
- A strong technology backbone that lets borrowers access loans in days, not weeks, combining real-time portfolio value assessments with a seamless application journey.
- A team that’s both knowledgeable and approachable, able to collaborate with your wealth manager, solicitor, and tax advisor to ensure your estate and tax planning are aligned.
Inheritance tax reforms in the UK—particularly the inclusion of pension assets in the estate, reductions in reliefs on business and agricultural property and stricter residency requirements—mean that estate planning has become more urgent and more complex. Lombard lending offers a flexible, investment-friendly way to meet those challenges: maintaining asset exposure, providing liquidity, and offering strategic tax planning opportunities without forced disposals.
If you are aiming to safeguard your wealth, protect your heirs, and retain control over your investments, integrating Lombard lending into your plan is no longer just an option—it’s a necessity.
Firenze is committed to helping you, and your advisor, navigate this landscape, model the trade-offs, and implement solutions that are both tax-efficient and aligned with your long-term goals.
Download our whitepaper to find out more about Lombard Lending and how it can benefit your long term financial strategy.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Wealth managers must seek appropriate regulatory permissions before introducing or advising on Lombard lending solutions.
