Inheritance tax and lifetime gifting: Should you act before November’s Budget?

With potential reforms to Inheritance Tax expected in November’s Budget, individuals may wish to seek advice on lifetime gifting sooner rather than la

As we approach the Autumn Budget on 26 November 2025, many experts are predicting significant changes to Inheritance Tax (IHT). For families and individuals looking to pass on their wealth, the speculation around reforms to lifetime gifting rules is particularly important, and with potential shifts on the horizon, it may be worth taking advice on the options for lifetime gifting, especially if gifting is something already being considered.

The current IHT rules on lifetime gifting

As part of succession planning and with a view to reducing their inheritance tax liability, many people choose to make lifetime gifts, transferring assets to loved ones while they are still alive.

The key feature of the current rules regarding lifetime gifting is that gifts made from one individual to another do not trigger an immediate IHT charge, regardless of their value. This enables large wealth transfers down to the next generation without an immediate inheritance tax bill – if the donor survives the seven-year period.

The seven-year rule

A lifetime gift made from one individual to another is known as a Potentially Exempt Transfer, or ‘PET’. If the donor lives for seven years after making the gift, its value becomes completely exempt from IHT and falls outside of the estate for inheritance tax purposes.

However, if the donor dies within seven years of making the gift, its value is added back into the donor’s estate for inheritance tax purposes. The value of the gift will reduce the donor’s available Nil-Rate Band (currently £325,000). If the total value of ‘failed gifts’ exceeds this allowance, 40% IHT may be payable (subject to taper relief), and the initial responsibility to pay the IHT sits with the recipient of the gift. 

What changes could the Autumn Budget bring?

The government is reportedly exploring ways to increase tax revenue, and IHT is an obvious target for change. The rumoured reforms focus on making the rules around lifetime gifting less generous, and while nothing is certain, two main points are dominating the conversation.

1. Extending the 7-Year Period

One of the most discussed changes is an extension of the 7-year rule to 10 years or even longer. If this happens, donors will need to survive a much longer timeframe after making a lifetime gift in order for the gift to become fully exempt from IHT.

1. Introducing a Lifetime Cap on Gifts

A more significant reform would be to introduce a cap on the total value of lifetime gifts someone can give without incurring an immediate tax charge – similar to the existing rules for gifts made into trusts.

What this means for individuals

These potential reforms are particularly significant. Transferring wealth on to the next generation can involve a complex process that often depends on careful, long-term planning, and consideration of the recipient’s circumstances.

Although we cannot predict the exact outcomes of the Autumn Budget, it is unlikely that the current rules surrounding lifetime gifting will become more generous. Therefore, if you and your family are already considering making significant lifetime gifts as part of your estate succession plan, it might be advisable to accelerate those discussions.

Navigating the complexities of IHT and estate planning can be daunting, especially when faced with potential legislative changes and the significant impact of the changes announced in the previous Budget in October 2024. At Wrigleys Solicitors, we specialise in providing clear, strategic advice tailored to the unique needs of families.

If you are concerned about how potential IHT reforms could affect your plans, our team of experts is here to help.

If you have any questions or we can assist, please contact any member of the Private Client team on 0113 244 6100.

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The information in this article is necessarily of a general nature. The law stated is correct at the date (stated above) this article was first posted to our website.

Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors.