Tougher lifetime gifting rules could increase inheritance tax liabilities
Charitable donations. Listed buildings. Business shares. These are just some of the gifts that can be made without incurring inheritance tax (IHT), but only if you know how to make the most of different reliefs and exemptions.
The rules around gifting and IHT can be very difficult to follow – especially when the goal posts keep moving. The government announced a number of IHT changes in last year’s autumn statement, and speculation is mounting that IHT and lifetime gifting will once again be in the budget spotlight on 26 November 2025.
Current allowances and exemptions
IHT is payable after a person’s death – although this depends on the value of your estate and your beneficiaries. As explained in the latest Attwaters Private Wealth Guides, lifetime gifting can help to minimise tax liabilities in various different ways.
Under current rules, everyone is entitled to a £3,000 annual exemption. This means you can give away a total of £3,000 worth of gifts – to one individual or split between several people – each tax year without any IHT implications. If the full allowance isn’t used in one tax year, it can be carried forward for one year.
You can also give up to £250 worth of gifts to multiple recipients in each tax year, as long as they are not already the subject of another allowance.
Early lifetime gifting can reduce tax liabilities
Gifts with a value above £3,000 are only subject to IHT if the donor dies within the next seven years. This exemption applies to financial sums as well as other assets, such as business shares, antiques and properties.
When a donor dies before the seven years are up, gifts are taxed on a sliding scale. Until year three, the standard 40% rate of IHT is payable; a ‘taper relief’ is then applied with the rate reducing each year from 32% to 8%.
If you start making lifetime gifts, or Potentially Exempt Transfers as they are formally known, in your 50s or 60s, this could reduce IHT liabilities by thousands of pounds.
Speculation about new IHT rules
At the moment, there’s no cap on the overall value of lifetime gifts but there has been speculation by the media and financial industry watchers that this might change in the autumn budget. There are also rumours that the seven-year rule and taper relief could be amended. Any of these suggested reforms could increase IHT liabilities.
Changes announced in last year’s budget to Business Property Relief and IHT have already prompted some individuals to take action before the proposed new rules come into force in April 2026. For example, it’s been reported that family-run firms are rearranging company structures and setting up trusts to try to minimise potential IHT payments in the future.
Review your gifting options
Exploring existing lifetime gifting options before reliefs or exemptions are changed could help to minimise the IHT payable on your estate.
If you want to learn more about the current rules, check out the latest Attwaters Private Wealth Guides or contact one of our private wealth specialists on 0330 221 8855, or enquiries@attwaters.co.uk, for expert advice.
