Passing wealth to your loved ones during your lifetime can be a rewarding way to support those who matter most to you.
You may wish to help children onto the property ladder, contribute to a grandchild’s higher education, or simply allow your family to enjoy some of your wealth while you’re still here to see the benefits.
Lifetime gifting could also help you reduce a potential Inheritance Tax (IHT) bill for your loved ones after you’re gone.
This might be especially pertinent given more families are being drawn into the scope of IHT.
According to the government website, IHT receipts reached £8.5 billion between April 2025
and March 2026, compared to £8.2 billion in the previous tax year.
If your estate might be liable for IHT in the future, gifting could help reduce the value of the wealth you eventually pass on.
However, if you’re married, in a civil partnership, or planning your finances as a couple, you might want to give careful consideration to who actually makes the gift.
This might sound like an insignificant detail. After all, if you and your partner view your finances as shared, it may not seem to matter whose account the money comes from.
In reality, it could make a significant difference to how effective the gift is for IHT purposes.
Continue reading to discover three questions worth asking yourself that could help you decide who should make a gift.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning.
1. Whose estate is most likely to face an Inheritance Tax bill?
In the 2026/27 tax year, the nil-rate band – the amount you can typically pass before incurring IHT – stands at £325,000.
You may also benefit from the residence nil-rate band of up to £175,000 if you leave your main home to a direct lineal descendant.
Married couples and civil partners can normally pass assets to each other free from IHT, and may also be able to transfer unused nil-rate bands to the surviving spouse or civil partner.
This means a couple could potentially pass on up to £1 million before IHT is due.
It’s vital to note that this doesn’t automatically mean it makes no difference who gives money away during their lifetime.
If one person has a much larger estate than the other, it may be more prudent for them to make gifts first. This could help reduce the value of the estate that is most likely to face an IHT bill.
For instance, imagine you own a greater share of the family wealth because you hold investments, business assets, or property in your own name.
If your partner has a smaller estate, a gift from their assets may do little to reduce the overall IHT exposure.
Conversely, a carefully planned gift from your estate could bring more of your wealth closer to the available tax-free thresholds.
This is particularly important if you and your partner aren’t married or in a civil partnership, as you wouldn’t usually benefit from the same spousal exemption.
2. Who is more likely to survive for seven years?
Some lifetime gifts might be treated as “potentially exempt transfers” (PETs). This means the gift could fall outside your estate for IHT purposes if you survive for seven years after making it.
If you die within seven years, the gift may still be counted as part of your estate, and IHT may still be due.
Read more: What is a “potentially exempt transfer”, and could it help you mitigate Inheritance Tax?
This is why health and life expectancy can matter when deciding who should make a gift.
For example, imagine one person in a couple has serious health concerns while the other is in good health.
If the person in poorer health makes a large gift and passes away within seven years, the gift may not achieve the intended IHT benefit.
In contrast, if the healthier person makes the gift, there may be a greater chance it becomes fully exempt after seven years.
Of course, it’s impossible to completely predict the future, and you should avoid making decisions based purely on assumptions about life expectancy.
Still, if gifting is part of a long-term IHT plan, it’s worth thinking about whether the person making the gift is likely to survive long enough for the strategy to work as intended.
3. Who has surplus income available?
You may also be able to make regular gifts from your surplus income, and these can be immediately exempt from IHT if they meet certain conditions.
To qualify, these gifts typically need to:
- Be made from income, not capital
- Form part of a normal pattern of gifting
- Leave you with enough income to maintain your usual standard of living.
This could be useful if you receive more income than you need each month or year.
For instance, you might have pension income, rental income, or dividends that regularly exceed your normal spending.
Rather than allowing this surplus income to build up in your estate, you could gift some of it to children or grandchildren.
Again, however, it matters who makes the gift.
If you have more surplus income than your partner, you may be better placed to use the exemption.
You might receive a defined benefit pension and have more income than you need, while your partner relies more heavily on savings and investments. In this instance, gifts from your income may be more tax-efficient than gifts from your partner’s capital.
That said, it’s vital to keep clear records if you wish to use this exemption.
Your executors may need to show HMRC that gifts were regular, made from income, and didn’t affect your lifestyle.
Without the proper evidence, HMRC may treat the payments differently, which could create an unexpected IHT issue later.
Get in touch
We can help you understand who may be better placed to make a gift and how it may affect your long-term financial security.
To find out more, please contact us by email at info@investmentsense.co.uk or call 0115 933 8433.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
