Gift of the grab for the taxman

FAMILIES hoping to reduce inheritance tax by gifting assets during their lifetime must learn the rules or risk being hit with an unexpected bill from HMRC.

- By Harvey Jones

Passing on wealth early can cut your exposure to inheritance tax (IHT), but only if done by the book.

Even well-meaning gifts may still count as part of your estate if they break HMRC’s complex rules, triggering a hefty tax charge when you die.

Last year, £61million worth of lifetime gifts were caught out in exactly this way, according to research from law firm TWM Solicitors. HMRC opened 220 investigations in 2023/24 into so-called “gifts with reservation of benefit”, where someone appears to have given something away, but still benefits from it.

That might mean giving your home to your children but continuing to live there rent-free, or handing over a holiday property while still spending each summer there.

Even gifting valuable items like antiques or artwork can fall foul of the rules if they remain in use or on display.