Why is gifting back in the spotlight?
Rising Inheritance Tax (IHT) receipts and ongoing reforms mean more families are being drawn into the net. Frozen thresholds and planned changes, including bringing unused pension funds into IHT from April 2027, are prompting many to review how they pass on wealth.
How can gifting help reduce IHT?
Making gifts during your lifetime can reduce the value of your estate. These are known as ‘potentially exempt transfers’ and fall completely outside your estate for IHT purposes if you survive for seven years after making them. Alongside this, annual exemptions still play a key role. For example, the £3,000 yearly allowance and small gifts of £250 per person per tax year, which help individuals pass on wealth gradually.
What’s driving increased interest?
There is growing demand for gifting strategies as families respond to tightening rules. With pensions historically used to pass on wealth tax-efficiently, their inclusion in IHT calculations from 2027 is accelerating the shift towards lifetime gifting.
Are there any risks to making gifts outright?
Yes. Once a gift is made, you no longer control the asset and it cannot usually be reversed. This can create issues if circumstances change or if beneficiaries receive funds before they are ready. Also, gifts with continued benefit, for example, giving away your home but still living in it rent-free, may still be counted as part of your estate.
Is there a way to retain control?
Increasingly, families are exploring how to gift with control, such as placing assets into trusts. These structures can allow wealth to be distributed gradually while maintaining oversight, offering both flexibility and protection.
What should you do next?
Gifting can be a powerful IHT planning tool, but it needs careful consideration. Seeking professional advice can help ensure your strategy aligns with your long-term goals.
Gifting and trust strategies can have tax implications and may not be suitable for everyone.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority does not regulate Will writing, tax and trust advice and certain forms of estate planning.