Prime Minister Rachel Reeves is targeting tax-free family gifts in the latest estate tax (IHT) reform, and Rachel Reeves is under fire from financial advisers.
Wealth managers and planners branded the proposals “stupid” and “blatant tax acquisition”, which could punish grandparents who financially raise their children and grandchildren.
Currently, individuals can be exempted from taxes of £3,000 per year and provide additional exemptions for weddings and small gifts of £250 per person. If the donor survives for seven years, larger transfers may also fall outside of the IHT.
However, the report shows that the Treasury is considering limiting or tightening these rules as part of an effort to fill the public fiscal gap before the fall budget.
“I can’t believe the Prime Minister is stupid enough to limit family gifts. What it accomplishes is to turn grandparents into overnight tax evaders and to send cash gifts to children and grandchildren to avoid people who have already considered non-taxable.
“Currently, the effective £1m stipend is provided for a married couple with children, and most people are unnecessarily worried about IHT. However, with frozen stipends, more and more families will be dragged into the IHT network in the coming years. My best advice is simple. My best advice is simple: spend money and enjoy yourself – and in addition, it is also to make sure you want to get the proper financial advice to make sure you are for your family and not Chancellor.
Benjamin Beck, founder of Baker Currency Coach, warned that the move could put financial pressure on young families.
“Family gifts can be a lifeline for many people from education to entering the property ladder. This will affect many, not just a few – which is surprising given the Labour slogan.” “The best way to solve this problem is to plan early, understand the rules and make the most of the allowances, including an annual waiver of £3,000 and an ongoing seven-year rule.”
David Stirling, an independent financial advisor for Belfast-based Mint Wealth, said: “It’s a blatant attempt to mom and dad bank, which relies on daily living costs or help with deposits. RachelReeves doesn’t have much Rachel Reeves left the table now and is now with IHT, property tax, business tax, business and punishment.”
Ribble Wealth Management, a financial planner at the parcel, underscores the importance of careful planning for whether rules change.
She noted that under the current framework, “the conventional gifts that do not affect the income of donors’ living standards are just outside the IHT – a rule that is often insufficient.” She added that trusts, life insurance and business relief can also play a role in long-term strategies.
“At the moment when intergenerational support matters most, any move to cut gifts can hit the family,” she said. “This only highlights the importance of starting a succession plan early and accepting professional advice.”
The debate on inheritance tax is because the Prime Minister wants to increase income while balancing Labor’s commitment to support working families. But as the cost of living continues to rise, IHT’s stagnant threshold and already frigid allowances, advisers warn that middle-class families may be dragged into the tax network.
For many, the prospect of losing the ability to make modest, tax-free gifts may not be like opening a hole, but more like punishing families trying to support the next generation.
