Making generosity part of your legacy to benefit future generations
As Christmas approaches, we turn our attention to family, friends and thoughtful ways to show we care. Beyond festive celebrations, this season of generosity offers an opportunity to consider a gift that could make a lasting difference: securing your loved ones’ financial future.
With careful estate planning, you can share the wealth you have worked hard to build, support family milestones and potentially reduce your Inheritance Tax (IHT) liability, all while protecting your financial security.
Make generosity part of your legacy
Whether you want to help children buy their first home, contribute towards a grandchild’s education or support a family wedding, giving during your lifetime allows you to see the benefits of your generosity.
Gifts to individuals are generally treated as potentially exempt transfers for IHT purposes. If you survive seven years after making a gift, it will normally fall outside your estate. If you die sooner, some or all of its value may remain relevant for IHT calculations, depending on the circumstances and available exemptions.
Before making substantial gifts, consider your future living costs, retirement plans and potential care needs to ensure you retain sufficient funds.
Understand the available exemptions
Several exemptions may help you give tax-efficiently. The annual exemption allows most people to give away £3,000 each tax year without incurring IHT. Any unused allowance can generally be carried forward for one year.
You may also give up to £250 per recipient each tax year under the small-gifts exemption, subject to conditions. Separate allowances apply to qualifying wedding or civil partnership gifts, depending on your relationship to the recipient.
Regular gifts from surplus income may also be exempt if they come from income rather than capital, form part of a regular pattern and leave you able to maintain your usual standard of living. Keeping accurate records will help establish whether these conditions are met.
Protect the wealth you leave behind
For 2026/27, the standard IHT nil rate band is £325,000. An additional residence nil rate band of up to £175,000 may apply if a qualifying home passes to direct descendants. Eligible married couples and registered civil partners may transfer unused allowances, potentially allowing up to
£1 million to pass free of IHT, subject to conditions. Thresholds are frozen until April 2031.
Reviewing your Will, asset ownership and wider estate plan can help ensure your wishes are carried out.
Give with confidence
Professional financial advice will help you understand exemptions, assess potential liabilities and develop a plan that balances generosity with your long-term financial security.
This Christmas, consider a gift that lasts beyond the festive season: a thoughtful legacy for generations to come.
This article does not constitute tax, legal or financial advice and should not be relied upon as such. Estate, tax planning and will writing are not regulated by the Financial Conduct Authority. For guidance, seek professional advice.