With the Autumn 2025 Budget expected in November, there is increasing speculation about reforms to Inheritance Tax (IHT). Among the options that could be under review are:
- A new flat-rate gift tax of 10–20% on lifetime gifts and death transfers, and
- An extension of the 7-year rule to 10 years, meaning gifts would take longer to fall out of your estate.
If introduced, these changes could significantly impact estate and succession planning.
Current rules on gifting
Cash gifts
- Cash can currently be given away with no immediate tax liability.
- Annual exemptions (£3,000) and gifts from surplus income are valuable and often overlooked.
Gifts of assets
- Gifts of property, shares, or other assets are treated as taking place at market value and may trigger Capital Gains Tax (CGT).
- Relief is available for business assets or shares in unquoted trading companies through a holdover election, passing the inherent gain to the recipient.
Discretionary Trusts
- Trusts are a useful alternative to outright gifts, especially for assets such as rental properties or shares in family companies.
- You can currently gift up to £325,000 into trust every 7 years without IHT, with holdover relief available to avoid upfront CGT regardless of the nature of the asset.
- Where transfers exceed £325,000, a 20% lifetime IHT charge applies on the excess.
- If the 7-year period were extended to 10 years, the recycling of allowances into trusts would be slower, making early planning even more important.
Why review now?
- The flat-rate gift tax could replace or restrict current PETs.
- The extension to 10 years would mean gifts take longer to escape IHT.
- Acting before changes are announced may help secure reliefs under today’s rules.
Next steps
- Review your estate and gifting strategy now.
- Consider whether cash gifts, asset transfers, or trusts are best suited to your circumstances.
- Keep full records and seek professional advice to ensure gifts are structured efficiently.
Please get in touch if you would like a copy of our detailed leaflets on Discretionary Trusts and CGT Gifting Relief, or contact us to arrange a personal review of your inheritance tax position.
Please note: The above resource is provided for general information only. No responsibility can be accepted by Ward and Co Accountants for any use made of the information presented, whether acting or refraining from action as a result of the material published. No action should be taken without consulting a professional adviser.
