Research published by The Private Office in May 2026, surveying over 2,000 UK adults aged 45 and over, found that 81% believe parents and grandparents should help their family financially during their own lifetime rather than only leaving money behind, and 86% have already done exactly that – most as outright gifts rather than loans. Property is the single biggest reason people give, cited by 51% of those who’d helped – something we’ve looked at separately in the tax and practical implications of gifting a home specifically, which carries its own set of considerations beyond what applies to gifting more generally. The reluctance, where it exists, tends to come down to one thing: 37% said their main concern was giving away money they might later need themselves. That’s really the whole question this article is about – not whether to pass on wealth, but how, and how much you can afford to part with while you’re still here to see what it does.
Gifting while you’re still around to enjoy it
Several gifting allowances exist specifically to let you do this without an Inheritance Tax consequence. You can give away £3,000 a year tax-free, and if you didn’t use last year’s allowance you can carry it forward once, giving you £6,000 to work with. Separately, you can give up to £250 to as many people as you like, provided none of them has already received a gift covered by another exemption that year. Wedding gifts have their own allowance too – £5,000 to a child, £2,500 to a grandchild, £1,000 to anyone else.
The exemption that gets used least, and is often worth the most, is normal expenditure out of income – gifts made regularly from surplus income rather than capital, with no upper limit, provided they don’t reduce your own standard of living. Regularly helping with a grandchild’s school fees or topping up a child’s pension contributions can both fall under this if the pattern is genuinely regular and genuinely from income rather than savings.
Above these allowances, larger gifts become what’s known as potentially exempt transfers: fully outside your estate if you survive seven years, and only ever taxed on the amount that exceeds your remaining nil-rate band if you don’t. Taper relief then reduces the tax due the longer you survive – 40% if death comes within three years, tapering down in stages to nothing at all beyond seven.
Why the thresholds matter more than they used to
The nil-rate band has sat at £325,000 since 2009, and the residence nil-rate band at £175,000 since 2020 – both originally due to unfreeze in April 2030, but extended for a further year to April 2031 at the Autumn Budget 2025. If your estate is worth more than £2 million, the residence nil-rate band also starts tapering away, at £1 for every £2 above that figure. We’ve set out how these thresholds fit into a wider Inheritance Tax plan in more detail separately, since gifting is usually only one part of that picture.
The change most people haven’t planned around yet
From 6 April 2027, most unused pension funds and death benefits will be brought into your estate for Inheritance Tax purposes for the first time – a genuinely significant shift for anyone who’s been treating their pension as sitting outside their estate by default. Death-in-service benefits stay excluded, but for most other pensions, it’s your personal representatives, not the pension scheme, who’ll be responsible for reporting and settling any tax due. The Autumn Budget 2025 also clarified that scheme administrators can now be directed to withhold up to half of the taxable benefit for up to fifteen months, giving personal representatives time to work out what’s actually owed. If a meaningful part of your estate sits in a pension, this is worth reviewing well before 2027 rather than after.
Trusts, when a straight gift isn’t quite right
A gift works well when you’re comfortable handing over both the money and control of it. A trust exists for when you’re not – funding a grandchild’s future without handing an 18-year-old a lump sum outright, or providing for a family member who isn’t in a position to manage money themselves. A discretionary trust gives trustees flexibility over how and when beneficiaries actually receive money, at the cost of some complexity: a 20% charge on anything settled above your own nil-rate band, and a periodic charge of up to 6% every ten years after that. A bare trust is simpler – the money legally belongs to the beneficiary from the outset, and they’re entitled to demand it at 18, which suits some purposes and not others depending on how much control you want to keep.
Life insurance in trust: a different tool for a different job
Writing a life insurance policy in trust doesn’t reduce Inheritance Tax on your existing estate, but it solves a different problem entirely: it keeps the payout itself outside your estate, so it isn’t taxed and doesn’t need to wait for probate to reach your family. Most insurers will do this at no extra cost, either when you take out the policy or afterwards, which makes it one of the more straightforward pieces of this whole picture to put right.
Let’s talk about what’s right for your family
We work with clients across Poole, Bournemouth and the wider Dorset area to think through gifting, trusts and the wider estate plan together, rather than picking one option in isolation. If you’d like to talk through what’s right for your own family, get in touch and we’re happy to have a no-obligation conversation.
Find out more about our Inheritance Tax planning services here
This article is for general information only and does not constitute financial or legal advice, which should be based on your individual circumstances. The information is aimed at retail clients only. All information is correct at the time of writing (September 2026) and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of current legislation and HMRC guidance, which is subject to change.
Trusts are not regulated by the Financial Conduct Authority, and the tax treatment of trusts and gifts depends on individual circumstances and may change in the future.