UK Estates Pay £1.09 Billion in Lifetime Gift Tax

Data from HM Revenue & Customs reveals that more than 5,000 estates paid over £1.094 billion in inheritance tax on lifetime gifts between 2020 and 2024. These charges were triggered by the seven-year rule, which brings assets back into an estate calculation if the giver dies within seven years of the gift. In the 2023-24 period, 1,390 estates paid an average of £226,000, totaling £315 million.

Financial experts attribute these costs to frozen nil-rate bands and common misconceptions regarding how taper relief applies to the £325,000 threshold. Tax exposure is expected to rise as former chancellor Rachel Reeves announced that most unused pension funds and death benefits will become liable for inheritance tax starting April 2027.

To combat underpayments, HM Revenue & Customs is deploying AI-driven data analytics. TWM Solicitors LLP estimates that identified underpayments could reach £392 million for the year ending March 2026. While Chancellor John Healey may further tighten gifting rules in the upcoming October Budget, Kemi Badenoch and the Conservative Party are considering reducing or abolishing the tax to allow savers to pass more wealth to their children.