A growing number of wealthy savers are taking active measures to reduce their Inheritance Tax (IHT) liability, with cash gifting proving the most favoured approach, according to new research from Paragon Bank. The findings, drawn from a survey of more than 2,000 active savers holding balances above £50,000, suggest that financial planning around inheritance has become an increasingly mainstream concern rather than a niche preoccupation.
The data found that 28% of respondents had taken deliberate action to lower their IHT exposure. Of those, 68% had chosen to give cash, making it the single most common method by some distance.
Gifting Strategies and the Seven-Year Rule
Beyond cash gifts, savers are deploying a range of other approaches. Boosting lifestyle spending was cited by 37% of those who had acted, while 27% had created a trust or alternative legal arrangement. Charitable donations from the estate were arranged by 23%, and 16% had transferred an asset such as property or land.
Among those making cash gifts, a third donated up to £3,000 per tax year (the annual gifting threshold under current HMRC rules) allowing them to transfer wealth free from IHT risk. A quarter, however, had made individual cash gifts exceeding that amount. Of those giving beyond the threshold, 27% had donated between £3,000 and £10,000, while 19% had transferred a lump sum of between £10,000 and £25,000. Larger transfers were also common: 30% had given between £25,001 and £100,000, and 14% had gifted more than £100,000.
The seven-year rule (which determines whether a gift remains subject to IHT should the donor die within seven years of making it) was a source of some anxiety. According to Paragon’s findings, 38% of those giving beyond the annual threshold said they were concerned about this rule, whilst 3% admitted they were entirely unaware of it. As for where the money goes, nearly half of cash gifters said they had given to their children, a quarter to grandchildren, 19% to other family members, and 15% to charitable causes.
Confidence Despite Complexity
Despite the sums involved, most of those making lifetime gifts reported feeling settled about their decisions. More than four in ten said they had no concern about exhausting their funds in later life, with a further 44% saying they were not particularly worried. Only 12% admitted to some degree of concern.
Separately, almost half of all respondents said they had looked into IHT rules as part of their broader financial planning, which Paragon said pointed to a proactive rather than reactive approach to managing long-term finances. Wider sentiment towards the tax itself was notably critical. Nearly two-thirds of respondents considered IHT unjust and in need of reform, while just one in ten viewed it as a fair method of taxing wealth.
Andrew Wright, head of savings at Paragon Bank, said the findings reflected purposeful decision-making rather than panic. “Most do not feel concerned about running short later in life, which suggests they are planning carefully and acting with purpose rather than simply reacting to future tax liabilities,” he said, adding that IHT remained an area “where many people still lack confidence” given the complexity of the rules.
