How changes to lifetime gifting could reshape succession planning, wealth transfer, and family financial support.
HM Treasury has signalled in the build up to the Chancellor of the Exchequer’s upcoming Autumn Budget that there may be further tightening of the UK’s IHT regime, with particular attention now turning to lifetime gifting. Proposals could include amendment to or the abolishment of the seven-year gifting rule and further restrictions on lifetime exemptions. This comes amidst the introduction of the previous changes announced in the 2024 Autumn Budget, namely the scaling back of agricultural and business reliefs (from April 2026) and pension assets being brought into the IHT net (from April 2027).
While these reforms are intended to target wealth rather than ordinary working income, in practice they risk introducing significant disruption to established succession planning strategies. UK tax professionals advising private clients, family businesses, and farmers will need to consider the broader implications of these proposals, not only in terms of tax exposure, but also legal certainty, liquidity planning and broader client trust.
Succession planning: The seven-year rule has served as a fundamental mechanism for clients to reduce their taxable estates via potentially exempt transfers (PETs) and significant changes to these rules would represent a material shift in the UK’s estate planning landscape.
For decades, tax-efficient lifetime gifting has enabled intergenerational transfers that support family members while alleviating IHT exposure. It has also allowed clients to pass down shares in family businesses or tranches of agricultural property in a structured manner. In many cases, these gifts form the basis of broader succession strategies that take years to implement.
Any replacement regime, such as a lifetime IHT allowance or a flat lifetime charge akin to regimes seen in other jurisdictions, would significantly impact both high net worth and moderately wealthy families who have relied on PETs and the £3,000 annual exemption to make routine support payments.
Implications: For tax advisers, this raises complex timing issues. Should clients accelerate lifetime gifting strategies? Could any such action inadvertently crystallise a future liability if anti-avoidance provisions are applied? Or simply, is the best solution to do nothing?
Changes to lifetime gifting rules will be particularly acute in sectors that rely on inter-generational succession, notably agriculture and family-run businesses.
The planned reduction of APR and BPR from 2026 already poses major challenges. If combined with more aggressive treatment of lifetime transfers, the result could be reduced reliefs, accelerated taxation and liquidity constraints at the point of generational handover.
Advice and best practice: From April 2027, pensions will come into the IHT net, yet another significant shift after decades of policies promoting pensions as a core retirement and estate planning tool. The move not only adds complexity to IHT planning, but also undermines trust in the predictability of tax treatment around government-backed savings schemes. Tax professionals should revisit existing strategies that involve retaining pension wealth as a vehicle for tax-free inheritance.
From a practical perspective, the ‘noise’ coming from the Government and Treasury should encourage practitioners to:
review their client’s existing PET strategies, consider liquidity on death (particularly for farmers and business owners);
maintain detailed records of their client’s gifting; and
potentially consider the introduction of greater flexibility into their estate planning (for example, the use of discretionary trusts, family investment companies, alphabet shares and staggered share transfers).
Looking ahead: Chancellor Rachel Reeves has repeated the Government’s commitment to sustained growth, business investment, and entrepreneurship. Yet those tax changes announced in Autumn 2024 and the signals from the Treasury in the build up to the Autumn 2025 Budget risk directly undermining those aims by penalising long-term planning and reducing certainty for families and enterprises.
Effective estate planning requires policy stability. Ad hoc reform that affects existing arrangements threatens to erode trust.
There is a strong argument to be made that IHT reform, if pursued, should be strategic and coordinated, not piecemeal. Otherwise, we risk creating an environment in which prudent planning is punished, and the line between tax avoidance and legitimate mitigation becomes increasingly blurred. n
Home >Articles > The hidden costs of a cap on lifetime gifting
The hidden costs of a cap on lifetime gifting
How changes to lifetime gifting could reshape succession planning, wealth transfer, and family financial support.
HM Treasury has signalled in the build up to the Chancellor of the Exchequer’s upcoming Autumn Budget that there may be further tightening of the UK’s IHT regime, with particular attention now turning to lifetime gifting. Proposals could include amendment to or the abolishment of the seven-year gifting rule and further restrictions on lifetime exemptions. This comes amidst the introduction of the previous changes announced in the 2024 Autumn Budget, namely the scaling back of agricultural and business reliefs (from April 2026) and pension assets being brought into the IHT net (from April 2027).
While these reforms are intended to target wealth rather than ordinary working income, in practice they risk introducing significant disruption to established succession planning strategies. UK tax professionals advising private clients, family businesses, and farmers will need to consider the broader implications of these proposals, not only in terms of tax exposure, but also legal certainty, liquidity planning and broader client trust.
Succession planning: The seven-year rule has served as a fundamental mechanism for clients to reduce their taxable estates via potentially exempt transfers (PETs) and significant changes to these rules would represent a material shift in the UK’s estate planning landscape.
For decades, tax-efficient lifetime gifting has enabled intergenerational transfers that support family members while alleviating IHT exposure. It has also allowed clients to pass down shares in family businesses or tranches of agricultural property in a structured manner. In many cases, these gifts form the basis of broader succession strategies that take years to implement.
Any replacement regime, such as a lifetime IHT allowance or a flat lifetime charge akin to regimes seen in other jurisdictions, would significantly impact both high net worth and moderately wealthy families who have relied on PETs and the £3,000 annual exemption to make routine support payments.
Implications: For tax advisers, this raises complex timing issues. Should clients accelerate lifetime gifting strategies? Could any such action inadvertently crystallise a future liability if anti-avoidance provisions are applied? Or simply, is the best solution to do nothing?
Changes to lifetime gifting rules will be particularly acute in sectors that rely on inter-generational succession, notably agriculture and family-run businesses.
The planned reduction of APR and BPR from 2026 already poses major challenges. If combined with more aggressive treatment of lifetime transfers, the result could be reduced reliefs, accelerated taxation and liquidity constraints at the point of generational handover.
Advice and best practice: From April 2027, pensions will come into the IHT net, yet another significant shift after decades of policies promoting pensions as a core retirement and estate planning tool. The move not only adds complexity to IHT planning, but also undermines trust in the predictability of tax treatment around government-backed savings schemes. Tax professionals should revisit existing strategies that involve retaining pension wealth as a vehicle for tax-free inheritance.
From a practical perspective, the ‘noise’ coming from the Government and Treasury should encourage practitioners to:
review their client’s existing PET strategies, consider liquidity on death (particularly for farmers and business owners);
maintain detailed records of their client’s gifting; and
potentially consider the introduction of greater flexibility into their estate planning (for example, the use of discretionary trusts, family investment companies, alphabet shares and staggered share transfers).
Looking ahead: Chancellor Rachel Reeves has repeated the Government’s commitment to sustained growth, business investment, and entrepreneurship. Yet those tax changes announced in Autumn 2024 and the signals from the Treasury in the build up to the Autumn 2025 Budget risk directly undermining those aims by penalising long-term planning and reducing certainty for families and enterprises.
Effective estate planning requires policy stability. Ad hoc reform that affects existing arrangements threatens to erode trust.
There is a strong argument to be made that IHT reform, if pursued, should be strategic and coordinated, not piecemeal. Otherwise, we risk creating an environment in which prudent planning is punished, and the line between tax avoidance and legitimate mitigation becomes increasingly blurred. n
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