Giving while living: 3 reasons to slow down and make a plan
Inheritance Tax rules are changing. Discover three reasons to slow down, make a plan, and harness giving while living to reclaim your estate’s tax-efficiency.
According to FTAdviser, 48% of financial advisers reported that Inheritance Tax (IHT) planning tops the list of concerns among their retired clients.
This is largely due to new tax rules announced by Rachel Reeves in her 2024 and 2025 Autumn Budgets, some of which are set to take effect from April 2026.
It’s easy to feel overwhelmed by the prospect of new tax rules limiting the inheritance your loved ones can receive. But panicking and rushing into wealth transfer decisions could see you losing even more of your money to IHT.
Instead, keep reading to discover three reasons why you should take a calm and considered approach to your financial plan, and how taking advantage of lifetime gifting could be a tax-efficient way to pass on wealth now.
1. Inheritance Tax receipts are rising, indicating it’s time to revisit your estate plan
As mentioned previously, various new rules are reducing the number of tax-efficient avenues that you can use to pass on your wealth through inheritance:
- From 6 April 2026, new caps are being introduced on Agricultural Relief (AR) and Business Relief (BR), which will restrict the amount of IHT-efficient wealth passed on through farms and businesses.
- From April 2027, unused pension pots will be included as part of the estate. It is estimated that this will affect 38,000 more estates, each liable to pay an extra £34,000 in IHT, according to HMRC analysis.
- The nil-rate bands are also remaining frozen until 2031, which will cause more people to pay IHT as inflation increases the size of their estate.
The total amount that the government will receive from IHT is estimated to reach £15 billion by 2030, FTAdviser reports, which might seem like a daunting figure.
However, it isn’t all doom and gloom. While some IHT-efficient doors are closing, others, like lifetime gifting, remain wide open.
Lifetime gifting involves incrementally passing on IHT-free wealth to your loved ones using specific HMRC allowances. Doing so can help you gradually reduce the value of your estate so that your beneficiaries will have a smaller IHT bill to pay after receiving their inheritance.
Therefore, you could switch to a lifetime gifting strategy to try to mitigate the effects of these new rules and restore your estate’s tax efficiency. However, it’s important to first seek professional advice to determine whether this route is right for you.
2. Planning ahead can help you avoid making rushed decisions
As a long-term financial objective, it’s easy for estate planning to slip to the back of your mind.
However, failing to react thoughtfully now could impact your options for IHT-efficiency down the line.
For instance, lifetime gifting is a long-term strategy which benefits most from consistency and early implementation; the sooner you start using lifetime gifting, the more IHT-efficient wealth you can pass on.
Lifetime gifting loses its potency to reduce your estate’s IHT liability the longer you wait. Gifts that fall outside of your HMRC gifting allowances are known as potentially exempt transfers (PETs).
PETs can be a reliable means of passing on inheritance. However, there is risk involved, as PETs are subject to the full 40% IHT on death within three years of making the gift, while taper relief slowly reduces the rate of tax payable up to seven years after the gift is made.
Ultimately, estate planning isn’t something to consider only in later life. Instead, it should form part of your long-term financial plans from the outset.
3. Your loved ones could benefit from your funds now rather than later
In November 2025 alone, 61% of British adults reported an increase in their monthly living costs, according to Commons Library statistics.
Alongside this, UK house prices are continuing to rise, with Land Registry data reporting an average valuation of £270,259 in December 2025.
If your loved ones are struggling to meet their financial objectives because of the cost of living, it could make sense to start gifting them their inheritance now.
For example, your children or grandchildren could use the wealth you gift them to put down a deposit against their first home, pay nursery or school fees, reduce their student debt, or simply keep up with day-to-day costs.
Lifetime gifting can help give your loved ones a helpful financial boost to develop their own financial plans, with the added bonus that you get to witness the positive effects of your money first-hand as it changes their lives for the better.
Get in touch
Avoid any inheritance tax panic by getting in touch with your Kellands financial planner today.
We can help you make calm, collected, and strategic decisions to regain your estate’s tax efficiency the right way, rather than succumb to any knee-jerk reactions.
Email us at hale@kelland.co.uk or call 0161 929 8838.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing 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 HMRC legislation, which is subject to change.
Remember that taper relief only applies to gifts in excess of the nil-rate band. It follows that, if no tax is payable on the transfer because it does not exceed the nil-rate band (after cumulation), there can be no relief.
Taper relief does not reduce the value transferred; it reduces the tax payable as a consequence of that transfer.
The Financial Conduct Authority does not regulate estate planning or tax planning.