Families in the UK paid £315m in inheritance tax (IHT) on gifts in the past year, according to TWM Solicitors.
The figure is up from £302m the previous year. A total of 1,390 estates paid IHT on gifts, up from 1,310 the year before.
Handing over assets as gifts to family and friends is a well-established part of estate planning, aimed at reducing the value of estates for IHT purposes.
Most outright gifts are only ‘potentially exempt transfers’ though, meaning they are taxable if the person making the gift dies within seven years.
There are also common mistakes in the exact nature of a gift that can lead to it becoming liable for IHT, according to TWM.
These include gifting a house to children, but continuing to live there either rent-free or at less than full market rent, giving away an asset like a painting but keeping possession of it, and gifting a cash on the understanding that the giver can have all or some of it back if necessary.
David Lunn, a partner in the private client team at TWM, said: “The £315m paid in inheritance tax on gifts is a reminder that lifetime gifting needs to be approached carefully.
“Giving assets away can be an effective part of estate planning, but it is not simply a case of handing assets to the next generation and assuming they will fall outside your estate.
“With the government also bringing pensions within the scope of inheritance tax from April 2027, more families are likely to consider lifetime gifting as a way of reducing the value of their estates,” he added.
“But gifting without taking proper advice can create unexpected tax liabilities, or mean that a family misses out on valuable reliefs.”
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