INHERITANCE TAX GIFTING RULES TO CHANGE UNDER BURNHAM

The £3,000 annual gifting allowance for inheritance tax purposes will alter under Prime Minister Andy Burnham's administration, with changes taking effect from April 2027. BBC Radio 4's Money Box presenter Paul Lewis explained the reforms to listeners, noting that pension assets left after death will become liable for inheritance tax from that date. The current nil-rate band threshold, frozen at £325,000 since 2009, remains unchanged. Paul Lewis stated that inheritance tax is "probably the most hated of all taxes, even though in fact 19 out of 20 estates do not pay it."

The changes have prompted people to explore gifting arrangements before the new rules take effect. Research from independent financial advisors The Private Office found that more than eight out of 10 of their middle-aged and older clients believe parents and grandparents should transfer wealth before death. Under current rules, married couples can pass up to £1 million to descendants tax-free, comprising two £325,000 nil-rate allowances and two £175,000 main residence allowances. Unlimited wealth can be transferred to a spouse, civil partner, or charitable organisation without inheritance tax liability. The gifting rules also permit tax-free transfers under "surplus income" provisions, though experts advise maintaining records of such transactions.

The reforms will be introduced during Burnham's premiership following his succession of Sir Keir Starmer. Burnham has ruled out calling an early election, meaning the changes are scheduled to take effect during his current administration. Financial advisors have begun recommending strategies to minimise future tax liability before the April 2027 implementation date.