Almost a quarter of people plan to give money away to beat inheritance tax, research from Hargreaves Lansdown has revealed.
With plans to introduce pensions into the scope of inheritance tax from April 2027, and growing speculation that the Chancellor may look to make further tax changes in next month’s Budget, Hargreaves Lansdown said 23% of people said they would aim to give money away in a bid to manage inheritance tax.
A further 18% said they would spend more money to whittle down the value of their estate, while 8% said they would give their home away.
However, Hargreaves Lansdown warned that people could regret making knee-jerk reactions, particularly if they may need later-life care.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Inheritance tax worries have loomed large since the Government announced pensions would be included in people’s estates for inheritance tax purposes from April 2027. Pensions can be one of our biggest assets and so we will see more people facing inheritance tax in the years to come.
“The news has prompted more people to consider what they can do to manage any inheritance tax bill that their families may receive.
“None of us know how long we are going to live or what the future may hold. With this in mind, it is vital that you don’t overspend or give too much money away as there’s a chance you could do too much and leave yourself struggling later on. This is particularly the case if you end up needing care later on in life.”
Morrissey said people also need to be mindful of the rules around how gifting works, particularly when it comes to gifting out of surplus income which allows someone to give away as much income as they want without incurring inheritance tax but they must adhere to strict rules.
“Gifts must come from income, not capital and must be made on a regular basis without impacting your own standard of living. A good example would be paying school fees for a loved one. Careful notes should be made that enable your family to prove that you’ve met these rules in case questions are asked and, if in doubt, financial advice should be sought to make sure you are understanding the rules correctly,” she added.
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