Almost every honest answer to this question is an exemption HMRC publishes rather than a scheme somebody sells. The spouse exemption, the residence nil rate band, the annual gift allowance and the seven year rule between them account for most of the tax that is lawfully never paid. What follows is what each is worth, in HMRC's own figures, and where the expensive misunderstandings are.
How to avoid inheritance tax UK-wide: the exemptions that do the heavy lifting
Anything passing to a spouse or civil partner is exempt, and so is anything left to a qualifying charity, which is why GOV.UK lists leaving everything above the threshold to them as one of the two reasons there is normally nothing to pay. Beyond that, the thresholds themselves are the relief: £325,000 for everyone, a further £175,000 where a home passes to children or grandchildren, and whatever threshold a spouse who died first did not use.
Gifts, and the seven year rule as it actually works
You can give away £3,000 of gifts each tax year without them being added to the estate, and an unused annual exemption can be carried forward one tax year only. Beyond that, GOV.UK's seven year rule is the mechanism: no tax is due on a gift if you live for seven years after giving it, unless the gift is part of a trust. Regular gifts out of surplus income and gifts on marriage have their own separate exemptions.
Taper relief on gifts helps fewer estates than people think
Taper relief reduces the rate on a gift made three to seven years before death: 32% at three to four years, 24% at four to five, 16% at five to six, 8% at six to seven and nothing after seven. The condition people miss is on the same page: taper relief only applies where the total value of gifts in the seven years before death is over the £325,000 threshold. Below that the gifts use the threshold instead, and taper never engages.
How to avoid inheritance tax on a property, and the trap inside it
A home passing to children or grandchildren carries the residence nil rate band, taking a homeowner's threshold up to £500,000 where the estate is worth less than £2 million. Giving the house away instead usually does not work: GOV.UK is explicit that if you continue to live there without paying rent at the going rate, it is a gift with reservation and counts in the estate anyway. Moving out and surviving seven years does work, which is a different proposition entirely.
The charity rate, for estates already close to it
Where 10% or more of the net value of an estate is left to charity, some assets are charged at a reduced rate of 36% rather than 40%. For an estate already leaving a substantial legacy, increasing it to the 10% mark can leave the family beneficiaries no worse off while the charity receives materially more. It is arithmetic worth doing rather than a slogan.
Other questions people ask
Do I pay inheritance tax on my parents' house?
Only if the estate as a whole is above its thresholds. A home left to children or grandchildren carries the residence nil rate band of £175,000 on top of the £325,000 nil rate band, and where a parent's unused threshold transfers as well the combined figure is often larger than the house. The house is not taxed separately from the rest of the estate.
Is giving money away seven years before death a rule I can rely on?
It is a published rule, but it is the survival that does the work, not the gift. GOV.UK states that no tax is due on a gift if you live for seven years after giving it, unless the gift is part of a trust. Die inside seven years and the gift is brought back into account, with taper relief only helping where total gifts exceed the threshold.
Can I give my house to my children and carry on living in it?
Not without consequence. GOV.UK sets out that continuing to benefit from something you have given away makes it a gift with reservation, which is added back to the estate. Paying rent at the going rate for similar local properties, and your share of the bills, is the published way round it, and it is a real cost rather than a formality.
Does this page recommend a way to reduce a bill?
No. It sets out the exemptions and reliefs HMRC publishes, with the page each comes from, so you can see what exists and what each is worth. Whether any of them fits your estate is a reading of your own facts, and an enquiry from here goes to an accountant or solicitor who does that reading.