As a regular reader, you may recall that, over the next 30 years, around £7 trillion is likely to transfer between generations.

In this next article about preparing for your own wealth transfer, read about five gifting rules that could help you start sharing your wealth during your lifetime.

There are three benefits of giving while living:

• It could help ensure you pass as much of your wealth as possible to your family
• It might help you avoid or reduce Inheritance Tax (IHT) on your estate
• You can enjoy watching your family enjoy their inheritance.

Taking positive action today could help pave the way for your children's or grandchildren's success.

5 ways to start giving while living

1. Use your annual gifting allowance

You can gift up to £3,000 (2025/26) every year.

If you haven’t used the previous year’s allowance, you can carry it forward. So, you may be able to gift up to £6,000 in the same year.
 
Every individual has the same exemption allowance. So, you could team up with your spouse or civil partner and gift up to £12,000 in a single tax year, if you both use carried forward exemptions.

2. Celebrate marriages by gifting money

You can gift up to:

•  £5,000 to a child (including stepchildren)
• £2,500 to a grandchild or great-grandchild
• £1,000 to any other relative or close friend.

As long as you stick within set limits, money you gift to marrying couples will fall out of your estate for IHT purposes.

3. Share surplus income and gift regular sums 

This little-known rule allows you to give unlimited regular financial gifts. To meet the criteria, regular financial gifts must:

• Come from income, rather than from savings or capital.
• Not have any negative affect on your own standard of living. 

This regular gifting rule could help you to:

• Offer support to family with paying their rent, mortgage, or utility bills
• Pay into a savings account for a child under the age of 18
• Provide financial support to an elderly relative. 

While there’s no cap on the amount that you can gift this way, it’s important to ensure gifts you make are regular.

Keep clear and accurate notes about the gifts you make – you may need to prove what you have gifted and when.

4. Make smaller gifts using the small gift allowance

You can give multiple gifts of up to £250 each tax year to anyone you’d like – though not to someone who’s already benefited from another IHT allowance.
 
That said, birthday or Christmas gifts paid from your regular income are typically exempt from IHT.

5. Give more with “potentially exempt transfers”

Any financial gifts above the allowances outlined here are called “potentially exempt transfers” (PETs).
 
PETs can be a useful way to reduce the value of your estate. However, the “seven-year rule” means they only remain free from IHT if you survive beyond seven years after making the gift.
 
If you pass away within seven years of making a financial gift beyond the rules you’ve read about here, it may become liable for IHT.

 The amount of tax that may become due depends on how long you survive and how much of the related “taper relief” is applied. For example, if you die within three years of making the gift, IHT may be charged at 40%. If you survive for seven years or more, this is reduced to zero.

Get in touch 

Working with a financial planner can help you understand all your options and write up an estate plan that works for you and your beneficiaries.

If you’d like to learn more how you could start gifting your wealth, we’d be delighted to hear from you. 

Email [email protected] or call us on 0800 048 0150.

Please note
The information contained in this article is based on the opinion of Titan Wealth Planning and does not constitute financial advice or a recommendation for any investment or retirement strategy.
All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning.

Remember that taper relief only applies to gifts in excess of the nil-rate band. It follows that, if no tax is payable on the transfer because it does not exceed the nil-rate band (after cumulation), there can be no relief.

Taper relief does not reduce the value transferred; it reduces the tax payable as a consequence of that transfer.