Families in the UK who want to give money to their children or grandchildren are being urged to consider the timing of wealth transfers, as a major change takes effect in April. From April 6, most unused pension funds and pension death benefits will be brought within a deceased person’s estate for Inheritance Tax (IHT) purposes.
Why timing matters for gifts
Nouran Moustafa, Practice Principal & IFA at Roxton Wealth, said money can have greater impact when you are younger. She said: "Inheritance is often most powerful before someone becomes financially comfortable. £50,000 at 35 could be the difference between renting and buying, starting a business or not, or taking proper parental leave. The same £50,000 arriving at 60 may still be welcome, but it may not change someone’s life in the same way."
Moustafa added: "The pension Inheritance Tax changes from April 2027 make the timing conversation even more important, but tax should never be the only reason to gift. The first question is always: can the donor genuinely afford to give the money away? Longevity, future care costs and financial independence come first. After that, I think inheritance planning should focus less on dying with the smallest possible tax bill and more on using wealth at the point it can create the greatest impact. Good estate planning is not just about what you leave. It is about when you let it go."
Risks beyond inheritance tax
Another expert believes families should not let the tax changes push them into making gifts they could later regret. Harvey Dhillon, Founder and CEO at Zmartly, said: "The pension change is a good reason to review lifetime gifts, but it shouldn't hurry anyone into giving. For deaths from April 6, 2027, most unused pension money counts in the estate for Inheritance Tax, so some estates that owed nothing before could face a bill."
Dhillon warned of risks outside Inheritance Tax: "The biggest risk in giving sits outside Inheritance Tax. In England, if avoiding care charges was a significant reason for a gift, the council can charge as if the money were still yours, and there's no fixed time limit, so living for years after the gift doesn't make it safe. A key test is whether a need for care could reasonably have been foreseen when the gift was made, so a parent who gives while fit and healthy is on far firmer ground. Nobody knows how long they'll live or what care will cost, so a gift should only come from money you could never need to call on."
He also noted: "On the tax side, if you stay on without paying a full rent in a home you've handed to a child, it stays in your estate however long you live."
