Turn festive generosity into smart inheritance tax planning
The 2025 Budget didn’t slash inheritance tax (IHT), but it did quietly make planning more important:
IHT thresholds frozen until 2031
The Nil Rate Band (£325,000) and Residence Nil Rate Band (up to £175,000) are staying put, so as property and investments grow, more estates will tip into the 40% IHT bracket.
Pensions coming into IHT from April 2027
Unused pension funds will, in many cases, be counted as part of your estate for IHT.
Business and agricultural reliefs capped
Agricultural Property Relief (APR) and Business Property Relief (BPR) are now subject to a £1 million allowance per person (transferable between spouses/civil partners).
None of this stops you planning. In fact, Christmas is the perfect moment to start.
Using Christmas gifting as an IHT strategy
You may already be helping children and grandchildren with:
- Cash in Christmas cards
- Help towards rent or a house deposit
- Contributions to holidays, school fees or day-to-day costs
With a little structure, these gifts can form part of a deliberate IHT strategy – without taking the joy out of giving.
1. The £3,000 annual exemption – your “big present” allowance
Each tax year you can give away £3,000 that’s immediately outside your estate for IHT. You can put this to work at Christmas by, for example, helping with a deposit, debt repayment or a wedding fund.
Didn’t use it last year? You can usually carry it forward one year – potentially £6,000 each, or £12,000 per couple.
2. Small gift allowance – stocking-filler money
You can give up to £250 per person, per tax year, to any number of people, and those gifts are IHT-free (as long as that person doesn’t also use your £3,000 exemption that year).
Perfect for Christmas money for grandchildren, vouchers for nieces and nephews, or small cash gifts to godchildren.
3. Regular gifts from surplus income – the invisible helper
If you have more income than you need, you can make regular gifts out of surplus income (monthly, quarterly, yearly) that are immediately outside your estate with no seven-year wait – provided they don’t affect your standard of living.
Christmas is a good time to agree this with family, for example:
“Instead of one big Christmas envelope, we’ll set up a monthly transfer to help with your mortgage / childcare / uni costs.”
A simple festive checklist
This Christmas, you might:
- Make a Christmas gifting list – decide who you’d like to help and which allowances you’ll use.
- Use both partners’ allowances – where appropriate, each of you can use your own £3,000 exemption and £250 small-gift allowances.
- Start the seven-year clock on any big gifts – if you know you’ll help with a house deposit “one day”, doing it now gets the clock ticking.
- Check your will still matches your giving – if you’ve already helped one child significantly, make sure your Will still feels fair overall.
How we can help
Christmas is about seeing your family enjoy the support you can give them now – but it can also be the start of a sensible inheritance tax plan.
We can help you:
- Understand how the 2025 Budget affects your estate
- Build a Christmas (and all-year-round) gifting plan using the available allowances
- Review or update your will so your lifetime gifts and estate plan work together
- Coordinate, where needed, with your financial adviser on pensions and investments
If you’d like to turn this year’s Christmas giving into a proper inheritance tax strategy, we’d be happy to talk it through – ideally before the wrapping paper hits the floor.
