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Rachel Reeves' "daft" new inheritance tax move turns grandparents into "overnight tax evaders"

ended 25. August 2025

EXPERTS have slammed Chancellor Rachel Reeves' latest inheritance tax (IHT) grab as "daft" – as she now goes after family gifts.

The average pensioner gives 10% of their income, an average of almost £2,500, away to family each year.

You can currently give £3,000 a year untaxed as a gift, though wedding gifts are exempt.

Dropping the cap is among the measures being considered by Reeves as she tries to plug a gap in the nation’s finances, according to reports.
 

Going after family gifts in an IHT grab risks cutting struggling young families off from vital support, research by wealth manager Quilter and the Centre for Economics and Business Research said.
 

Scott Gallacher, Director at Leicester-based Rowley Turton, called the move “daft” and warned it will turn grandparents into “overnight tax evaders”.

He said: "I can’t believe the Chancellor would be daft enough to cap family gifts. All it would achieve is turning grandparents into overnight tax evaders, with cash gifts to children and grandchildren rocketing to avoid what many already see as an unfair tax. 

"At present, with an effective £1m allowance for a married couple with children, most people worry unnecessarily about IHT. But with frozen allowances, more and more families will be dragged into the IHT net in the years ahead. 

“My best advice is simple: spend it and enjoy yourself while you can – and beyond that, get proper financial advice to make sure what you want to pass on goes to your family, not the Chancellor.”

Benjamin Beck, Money Coach at Beck Money Coach, said many will be affected by the move.

He added: "Just when we thought it couldn't get worse. Family gifts can be a lifeline for many struggling families, and this change could have serious financial implications, such as getting a good education and getting on the property ladder harder.

"This will affect the many, not just the few. Which is surprising considering Labour's slogan is ‘for the many not the few’. Go figure. The best way to deal with this is to plan early, know the rules and the various allowances. 

"Take advantage of the £3,000 annual gift allowance and small gift exemptions (£250 per person) where possible. This isn't practical for the larger monetary requirements. Make use of the 7-year rule whilst we have it and if possible look at insurance for legacy planning."

David Stirling, Independent Financial Adviser at Belfast-based Mint Wealth Ltd, called the move a “blatant attempt to tax the Bank of Mum and Dad”.

He said: “Another day and yet another tax grab idea from our Chancellor, as she this time considers hitting the annual gift allowance exemption. This is a blatant attempt to tax the Bank of Mum and Dad, which so many people rely on to help from day-to-day living expenses to helping with property deposits. 
 

"There isn't much Rachel Reeves is leaving off the table now with IHT and property taxes already being mooted as being changed in the Autumn Budget, and business and pensions already being punished.”

Anita Wright, Chartered Financial Planner at Ribble Wealth Management, gave some advice on how to pass on wealth.

She said: “For individuals concerned about passing money on to family, the key is to plan early and make use of existing allowances. The current IHT framework allows annual gifts of £3,000 small gifts of £250 per person, and exemptions for wedding gifts. 

"More significantly, regular gifts out of income that do not affect the donor’s standard of living are immediately outside of IHT – a rule often underutilised. Potentially exempt transfers remain a cornerstone of planning, with taper relief providing protection even if the full seven years is not survived. 

"Beyond that, trusts, life insurance, and, in certain cases, business relief can form part of a structured strategy. Any move to clamp down on gifts risks hitting families at the very moment when intergenerational support is most vital. This only highlights the importance of beginning succession planning early, and taking advice to ensure wealth passes in the most efficient manner possible.”

6 responses from the Newspage community

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Editor
David Stirling
Independent Financial Adviser at Mint Wealth
Another day and yet another tax grab idea from our Chancellor, as she this time considers hitting the annual gift allowance exemption. This is a blatant attempt to tax the Bank of Mum and Dad, which so many people rely on to help from day-to-day living expenses to helping with property deposits. There isn't much Rachel Reeves is leaving off the table now with IHT and property taxes already being mooted as being changed in the Autumn Budget, and business and pensions already being punished.
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Editor
Anita Wright
Chartered Financial Planner at Ribble Wealth Management
For individuals concerned about passing money on to family, the key is to plan early and make use of existing allowances. The current IHT framework allows annual gifts of £3,000 small gifts of £250 per person, and exemptions for wedding gifts. More significantly, regular gifts out of income that do not affect the donor’s standard of living are immediately outside of IHT — a rule often underutilised. Potentially exempt transfers remain a cornerstone of planning, with taper relief providing protection even if the full seven years is not survived. Beyond that, trusts, life insurance, and, in certain cases, business relief can form part of a structured strategy. Any move to clamp down on gifts risks hitting families at the very moment when intergenerational support is most vital. This only highlights the importance of beginning succession planning early, and taking advice to ensure wealth passes in the most efficient manner possible.
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Editor
Scott Gallacher
Director at Rowley Turton
I can’t believe the Chancellor would be daft enough to cap family gifts. All it would achieve is turning grandparents into overnight tax evaders, with cash gifts to children and grandchildren rocketing to avoid what many already see as an unfair tax.

At present, with an effective £1m allowance for a married couple with children, most people worry unnecessarily about IHT. But with frozen allowances, more and more families will be dragged into the IHT net in the years ahead.

My best advice is simple: spend it and enjoy yourself while you can — and beyond that, get proper financial advice to make sure what you want to pass on goes to your family, not the Chancellor.
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Editor
Samuel Mather-Holgate
Managing Director & IFA at Mather and Murray Financial
This is tinkering that shouldn’t make much difference to IHT planning or to the treasury. Most gifts fall out of the donors estate after 7 years anyway, so assuming they survive this period the objective would be met. Wider IHT changes are likely, and these are worrying. A further reduction in the nil rate band or a massive hike to 50% have been rumoured. If the state take half of your possessions on death, this is something that won’t be stood for, and politically this would cause chaos. Reeves really is in a bind, and all her options look bad. It’s probably time to break an election promise and hike one of the protected trio of taxes; income tax, VAT and National Insurance.
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Tony Redondo
Founder at Cosmos Currency Exchange
You have to question the fairness of heavily taxing those who have carefully planned, saved, and continue to help their families to fund the government’s spending splurge. Many pensioners play a crucial role in supporting younger family members, often helping with education, day-to-day living costs, or a first step onto the housing ladder. This support is especially valuable at a time when younger generations face stagnant wages and high housing costs. To pass on wealth effectively, start early and consider a mix of approaches usually opens up more options. These might include making use of annual gift allowances (which don’t require the giver to survive seven years), lifetime gifts, pension planning, and even trust arrangements. Each option comes with different tax rules and timing considerations, so getting professional advice can make a big difference.
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Benjamin Beck
Money Coach at Beck Money Coach
Just when we thought it couldn't get worse. Family gifts could be the lifeline for many struggling families, the financial implications of getting a good education and getting on the property ladder is harder. This will affect the many not just the few. Which is surprising considering Labour's slogan is "for the many not the few". Go figure.

The best way to deal with this is to plan early, know the rules and the various allowances. Take advantage of the £3,000 annual gift allowance and small gift exemptions (£250 per person) where possible. This isn't practical for the larger monetary requirements. Make use of the 7 year rule whilst we have it and if possible look at insurance for legacy planning.