Gifting Your Wealth? Here’s How to Do It Right

More and more people in Teesside are choosing to share their wealth now rather than later.

It’s a thoughtful way to support loved ones financially while potentially reducing inheritance tax.

But is it the right move for you?

In this article, we’ll break down why sharing your wealth can make sense, the key things to think about, and how Joslin Rhodes can help you make confident, informed choices.

Why Gifting Wealth Matters More Now

Making the most of your wealth during your lifetime can bring real benefits for both you and your loved ones.

A key reason more people are gifting now is due to growing uncertainty around government changes — particularly fears that pensions could soon be included as part of your estate for inheritance tax.

Inheritance tax thresholds haven’t changed in years, so now, with potential pension reforms on the horizon, it’s no surprise if you’re thinking about gifting your wealth earlier.

It can be a smart way to reduce inheritance tax, but it’s important to plan carefully to make sure you stay financially secure.

Why It Can Be Complicated

Finding the right balance between giving and protecting your own financial wellbeing can be challenging and you need to ensure you don’t put your own financial security at risk.

At Joslin Rhodes, we can help you understand your options and craft a financial plan that works for you, your family and better yet, safeguards it from the taxman. That way, you can feel happier knowing everyone and everything is taken care of.

Understanding Lifetime Exemptions

There are effective ways to gift during your lifetime without triggering inheritance tax – if you stay within the right allowances.

Lifetime exemptions are specific allowances set by the government that let you give away money or assets tax-free, up to certain limits.

By making the most of these exemptions, you can reduce the overall taxable value of your estate – that’s the part of your assets HMRC may charge inheritance tax on after you pass away.

We can help you understand how these allowances work, explore the best strategies for your situation, and make the whole process straightforward and reassuring.

The Benefits of Early Planning

Getting a head start on gifting can make a big difference, not in the amount of tax owed if you pass away within seven years, but in improving the chances that no tax will be due at all.

One of the main reasons to gift early is the 7-year rule. This rule says that if you give a gift and live for at least seven years afterward, that gift is usually exempt from inheritance tax. But if you pass away within seven years, the gift may still be counted as part of your estate and could be taxed. These types of gifts are known as Potentially Exempt Transfers (PETs).

Gifting earlier doesn’t reduce the immediate tax bill, but it does give you a better chance of living beyond the seven-year mark and that’s when the tax advantage kicks in.

There’s also something called taper relief. If you pass away between three and seven years after making the gift, the amount of inheritance tax due may reduce over time. Here’s how that works:

• 0–3 years: 40%
• 3–4 years: 32%
• 4–5 years: 24%
• 5–6 years: 16%
• 6–7 years: 8%
• 7+ years: 0%

So while the tax rate doesn’t change at the moment you gift, the earlier you act, the more likely you are to survive long enough for taper relief or full exemption to apply.

It’s also worth knowing that gifts under the annual exemption (£3,000 per tax year) are immediately exempt from IHT, no matter what. Even if you pass away shortly after giving them, they aren’t included in your estate.

By understanding how these rules work and planning ahead, you can take control of your legacy and reduce the potential tax burden on your loved ones.

Types of Gifting Allowances and How to Use Them

Understanding the allowances available can help you make gifts tax-efficient – and we’ll show you how they apply.

• Annual Exemption: You can gift up to £3,000 each tax year without any inheritance tax. And if you don’t use it all one year, you can carry it forward for one more year.
• Small Gifts Exemption: You can give up to £250 to as many people as you like each tax year, tax-free.
• Gifts for Weddings or Civil Partnerships: You’re allowed to gift up to £5,000 to your child, £2,500 to a grandchild, or £1,000 to anyone else for these special occasions.
• Gifts Out of Income: These are regular gifts made from your surplus income – just as long as they don’t affect your usual lifestyle.
• Potentially Exempt Transfers (PETs): If you give gifts over these limits, they might still be tax-free – so long as you live for seven years after making them (as explained earlier).

The Role of Pensions in Gifting

Pension funds can be part of your gifting strategy too.

While your pension currently falls outside your estate for inheritance tax, many people are increasingly concerned that new rules may change this — making it a priority to consider using pensions as part of a wider gifting strategy.

Using your pension funds wisely can be a smart way to reduce the overall value of your estate.

But it’s important to get professional advice to make sure any gifting from your pension is done in the most effective and secure way.

At our Stockton Planning Rooms, our local experts will help you see what’s possible and what works best for you.

Staying Financially Secure While Gifting

Gifting is generous, but you need to think about your own long-term needs first.

Before you just give away your money, make sure you’ve covered your future needs— from Care Fees and inflation to day-to-day living.

Practical Tips for Gifting Wealth

A few practical steps can make gifting easier and clearer.

• Keep detailed records of any gifts you make – it helps keep everything clear down the line.
• Use your available exemptions fully before moving on to larger gifts.
• Regularly review your gifting plan to make sure it still fits your situation.

It’s often these small steps that make all the difference – and it’s something we see all the time in our work with local families.

Ready to Talk About Gifting?

Want to explore how gifting could work for you and your family?

At Joslin Rhodes, our specialist Pension Advice and Estate Planning team can help you make sense of it all – no jargon, just friendly local advice.

So, if you’d like some guidance or have questions, why not reach out for a chat? Or better yet, join one of our free Estate Planning Workshop.

You’ll learn about:

• Gifting and how it fits into estate planning.
• Protecting your home and savings from care fees.
• Key documents like Wills, Trusts, and Power of Attorney.

Plus, our expert team will bust common myths and answer your questions on the day.

Click here to reserve your spot.