Affluent savers are gifting cash in a bid to reduce their inheritance tax liability, new research from Paragon Bank has revealed.
Its survey of over 2,000 active savers with balances in excess of £50,000 found almost one in three (28%) had taken steps to cut their IHT exposure, with 68% of those opting to gift cash.
Other measures taken by affluent savers to reduce their IHT bill include increasing spending on their lifestyle (37%), setting up a trust or other legal structure (27%) and establishing charitable contributions from their estate (23%).
Additionally, 16% had gifted an asset such as property or land.
Among those who gift cash, Paragon Bank said a third (33%) give up to £3,000 per tax year, while a quarter (24%) have given in excess of £3,000.
More than a quarter (27%) of those giving cash in excess of the annual gifting allowance have given between £3,000 and £10,000, while 19% have gifted between £10,000 and £25,000 as a one-off sum.
A third (30%) have given between £25,001 and £100,000, with more than one in 10 (14%) gifting over £100,000. Of this cohort, 38% said they were concerned about the seven-year gifting rule although 3% said they were unaware of the rule.
Nearly half (48%) of those making gifts have chosen to give cash to their children, while a quarter have gifted to grandchildren, 19% to other family members and 15% have made cash gifts to charity.
Paragon Bank said the findings suggest many savers are choosing to act sooner rather than leaving wealth planning until later life, with 48% of those surveyed having already looked into IHT rules as part of their financial planning.
Despite taking money out of their estates, 44% are not at all concerned about running out of money, while a further 44% say they are not very concerned. Only just over one in 10 (12%) say they are a little concerned.
Andrew Wright, head of savings at Paragon Bank, said: “As inheritance tax rules continue to evolve, many people are taking practical steps to safeguard their wealth for future generations, whether that means gifting cash, reviewing their wills or putting structures in place to manage how wealth is passed on.
“What is particularly striking is that those making lifetime gifts are largely doing so from a position of confidence. Most do not feel concerned about running short later in life, which suggests they are planning carefully and acting with purpose rather than simply reacting to future tax liabilities.”
