Why living legacies are on the rise
With property prices still outpacing wages and university costs climbing, it’s no wonder parents and grandparents are choosing to give while they live. According to OBR figures, inheritance tax (IHT) receipts are projected to rise sharply in the coming years, with 50,000 estates expected to pay the 40% tax by 2027. But with proper planning, your estate doesn’t have to be one of them.
A toolkit for tax-efficient gifting
Here are some of the key routes available to those who want to give money to children or grandchildren without giving a slice to the Treasury:
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The annual exemption: Small, but mighty
You can gift up to £3,000 per year without it counting towards your taxable estate. If unused one year, it rolls over to the next—meaning a couple could give away £12,000 in a single year if neither used their exemption last year.
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The seven-year rule: Timing is everything
Larger gifts can escape IHT entirely—so long as you survive them by seven years. These potentially exempt transfers (PETs) offer big planning opportunities but require forward thinking.
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Surplus income: The hidden gem
Perhaps the most underused relief, gifting out of surplus income allows you to give unlimited amounts from your regular income, provided it doesn’t affect your standard of living. With meticulous record-keeping, this can be a game-changer—especially for high-income retirees.
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Special occasion gifting
Weddings and civil partnerships bring their own allowances: up to £5,000 for a child, £2,500 for a grandchild. When combined with the annual exemption, this can help fund life’s big moments, tax-free.
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Trusts and control
For families wanting to gift without losing control, trusts offer a structured solution—particularly for vulnerable or young beneficiaries. They come with caveats and costs but can be powerful planning tools.
The importance of record-keeping
One theme cuts through all the tax rules: documentation. The more evidence you provide—bank statements, income vs expenditure summaries, dates and values of gifts—the less chance your estate will fall foul of HMRC’s scrutiny. Executors will thank you.
Looking ahead: Change on the horizon
From April 2026, business and agricultural reliefs will tighten, and it’s likely IHT will remain a political and fiscal target. Planning today means your wealth goes to loved ones—not to patch budget black holes.
Final thoughts from GSI
At GSI, we often say that financial planning is about empowering choice. Gifting during your lifetime is one of the most rewarding choices you can make—but it pays to do it with your eyes open. If you’re thinking about helping your children buy a home, pay off debt, or plan for their own futures, talk to us. We’ll help you structure your generosity to maximise its impact and minimise tax.
Plan well. Live happy. Leave a legacy.
