Inheritance tax (IHT) can be a stressful topic. It’s hard enough imagining your loved ones coping without you — without also thinking about the taxman helping himself to a share of the wealth you leave behind. Wealth your family may very well need.
You may feel the taxman already takes quite enough of your money while you're alive. So, it’s only natural not to want to give him a penny more when you’re gone.
Fortunately, there are ways to reduce the amount of inheritance tax your estate may have to pay. One of them is simple: give away more of your wealth while you’re still here to enjoy seeing it put to good use.
A helping hand onto the housing ladder
The government is paying close attention to IHT — and has already moved to close some popular workarounds. Until recently, pension pots could often be passed on intact. But from April 2027, most pension wealth will become subject to inheritance tax.
That’s led many families to consider other ways to pass on wealth, including gifting lump sums during their lifetime — particularly to help children or grandchildren buy their first home.
It’s increasingly common to see six-figure “early inheritances” gifted to help younger generations onto (or up) the property ladder. This approach could keep money out of the taxman’s reach — and in the hands of the people you care about most.
Plus, there's the emotional reward: being around to see the difference your gift makes to your family’s lives.
But are there downsides?
1. You need to stay alive
The most obvious catch is the seven-year rule. To discourage so-called "deathbed giving," HMRC requires you to survive seven years after making a gift for it to be completely exempt from IHT.
If you don’t, a sliding scale of tax (known as "taper relief") may still apply — depending on how long you lived after the gift was made.
2. You need to consider the legal side
Giving money away sounds simple — but legally, it often isn’t.
You’ll need to consider whether your contribution is a gift, a loan, or a share in the property — each has different implications for tax, ownership, and liability.
You may also want to protect the money in case your loved one later divorces or runs into financial trouble. The right legal structure can make all the difference — so getting advice is essential.
3. You need to look after yourself too
Giving generously is admirable — but it’s important not to give more than you can afford. You may live longer than you expect, and costs such as care or inflation can quickly erode your retirement savings.
Plan carefully, budget for the long term, and leave yourself enough financial headroom for a comfortable later life. There’s no joy in turning 90 if you can’t afford the cake.
4. You need expert support
Like many financial decisions, giving during your lifetime is simple in principle — but more complex in practice. Done well, it could minimise IHT and help your family. Done badly, it can create financial and legal headaches for everyone involved.
The good news? You don’t have to navigate it alone
At Continuum, we can provide expert advice on inheritance tax, succession planning and property. So, if you're thinking about living, giving and leaving a legacy — talk to us today.
Changes to inheritance tax (IHT) on pensions from 2027 - Royal London
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to any Inheritance tax saving strategy you should seek independent financial advice before embarking on any course of action.
The Financial Conduct Authority does not regulate taxation and trust advice or will writing.
Levels and basis of reliefs from taxation are subject to change and their value depends upon your personal circumstances. We recommend that the investor seeks professional advice on personal taxation matters.
