These things have always bypassed a person’s taxable estate on death but, from 2027, they will be treated as part of the estate for Inheritance Tax purposes and taxed accordingly.
Now it would appear that further major changes to the Inheritance Tax rules are set to be announced in this year’s Autumn Budget on Wednesday 26 November 2025.
In order to plug the growing Government spending gap, increasing revenue from Inheritance Tax seems to be one of the Chancellor’s preferred methods and, this time, it is likely to affect lifetime gifting.
There is currently no limit on the amount you can gift during your lifetime. The general rule is that, as long as you survive for seven years from the date of the gift, the value of that gift will not form part of your taxable estate on death. In certain circumstances, if you die within three to seven years of the date of the gift, taper relief may be available, reducing the rate of tax payable on that gift.
Although nothing has been decided yet, there are suggestions that the Budget may introduce a limit on lifetime gifting. The Government is also considering getting rid of the seven-year rule or changing the way taper relief works.
These changes are likely to be very unpopular with people who are looking to mitigate Inheritance Tax, especially given that the nil rate band (ie the threshold below which an estate will not incur any Inheritance Tax) has been set at £325,000 for the last 16 years and will be frozen at that rate until at least 2028. Whilst the threshold has remained the same all this time, property prices have increased, on average, by 95% over the last 20 years.
Further updates will be available after the Budget has been announced. In the meantime, please do not hesitate to contact Senior Associate, Katie Hancock, on email: kch@cooperburnett.com or tel: 01892 515022.
This blog is not intended as legal advice that can be relied upon and CooperBurnett LLP does not accept any responsibility for the accuracy of its contents.
