A Paragon Bank survey reveals that 28% of affluent savers have taken steps to minimize inheritance tax, with 68% opting to give away cash. Changes in the 2024 Autumn Budget will include unspent pension pots in inheritance tax calculations from 2027, prompting more people to reduce their taxable wealth. The survey also highlights strategies like cash gifts, trusts, and increased spending to lower tax exposure, with many expressing confidence in their financial planning.
More than a quarter of affluent savers have taken steps to try and reduce the inheritance tax bill they leave behind, according to new data from Paragon Bank.
The survey revealed that 61% of active savers with balances of at least £50,000 believe Britain's inheritance tax regime is unfair and should be reformed. Of those surveyed, 28% admitted to taking measures to minimize their inheritance tax exposure, with 68% of them opting to give away cash as a strategy. Currently, individuals can pass on £325,000 tax-free, with an additional £175,000 allowance for those passing their main home to direct descendants.
Couples can combine these allowances, potentially allowing up to £1 million to be passed on tax-free. However, changes announced in the 2024 Autumn Budget by Chancellor Rachel Reeves will include unspent pension pots in inheritance tax calculations from April 2027, potentially increasing the number of people affected by the tax. This has prompted many to seek ways to reduce their taxable wealth.
Inheritance tax is a significant revenue source for the UK Treasury, with receipts reaching a record high of £8.5 billion in the 2025-2026 financial year, up from £8.3 billion the previous year. The survey also highlighted that cash gifts are a popular method for reducing inheritance tax, as they become exempt if the donor survives for at least seven years. If the donor dies within this period, inheritance tax is applied on a sliding scale.
Some gifts, such as those up to £3,000 per year, are exempt from tax regardless of the seven-year rule. Additionally, 37% of respondents increased their everyday spending to lower their taxable estate, while 27% set up trusts or other legal structures. A smaller portion, 16%, gifted assets like property or land. Among those who gave cash, a third gifted up to £3,000 per tax year to stay within the annual allowance.
Twenty-four percent made single gifts exceeding £3,000, with more than a quarter of these gifts ranging between £3,000 and £10,000, and 19% between £10,000 and £25,000. A third gifted between £25,001 and £100,000, while 14% gave over £100,000.
However, 38% of this group expressed concern about the seven-year gifting rule, though 3% were unaware of it. When asked about recipients, nearly half of the respondents gifted cash to their children, a quarter to grandchildren, 19% to other family members, and 15% to charities. Forty-eight percent of those surveyed had researched inheritance tax rules as part of their financial planning.
Among the 2,000 participants, over 40% were not concerned about running out of money later in life, and 44% were not very concerned. Andrew Wright, head of savings at Paragon Bank, commented on the findings, stating that many are taking proactive steps to protect their wealth for future generations, whether through gifting, reviewing wills, or setting up legal structures.
He noted that those making lifetime gifts are largely confident about their financial future, suggesting careful planning rather than a reaction to tax liabilities. He also emphasized the complexity of inheritance tax rules, urging savers to understand their options and make informed decisions. The rise in inheritance tax receipts reflects Labour’s focus on property owners to fund increased spending, with more 'ordinary families' expected to be affected as the freeze on valuation bands continues.
Susannah Streeter, chief investment strategist at Wealth Club, warned that this trend would likely pull more families into the inheritance tax net, contributing to fiscal drag
Inheritance Tax Affluent Savers Financial Planning Tax Avoidance UK Treasury
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