Over 200,000 families to give away homes to avoid inheritance tax – but what’s the catch? – London Wallet

Parents across the country are racing to pass on the family home to their children in a bid to avoid big inheritance tax bills, fresh analysis reveals.

The number of properties exchanging hands for free is expected to increase by more than 45% to around 220,000 this year, Land Registry figures show.

But analysts have urged caution over the trend as homes can still be subject to inheritance tax if families do not adhere to strict stipulations.

Roughly 130,000 properties are given away each year, according to the Land Registry data obtained via a freedom of information request by estate agent Hamptons.

In 2023, this number increased to around 152,000. But this year projections show it will reach around 220,000.

It comes after Chancellor Rachel Reeves amended rules around inheritance tax in her Budget, bringing pensions and farms into its scope.

David Fell, Hamptons’ lead analyst said: “Rising stamp duty bills for anyone buying a second property have been coupled with higher capital gains tax rates and lower personal allowances which have also been eroded further by inflation.”

Land Registry data show between a million and 1.2 million homes are sold in Britain each year – and 8% to 25% of these are given away without any money changing hands.

But it is worth noting that assets given three years before death are taxed at 40pc, and gifts made between three and seven years before death are subject to tapering.

Separate research by Standard Life found nearly a third of savers are considering giving away money to family members more regularly to reduce their inheritance tax liabilities.

A further one in five were planning to buy an annuity to avoid a large death duty bill.

Standard Life’s retirement savings director Mike Ambery said: “While it’s natural to consider how to minimise inheritance tax liability through strategies like increased gifting, it’s important that people consider their own retirement incomes and remember that pensions need to last for the whole of retirement.”

Rob Morgan, of wealth management firm Charles Stanley, added the rise in families passing on property was likely driven by fears Labour would increase the rate of capital gains tax.

He said: “Going forward this trend will surely accelerate. In the Autumn Budget, the Chancellor unveiled plans to include inherited pensions for inheritance tax purposes from April 2027, as well as restrictions to Business Property Relief and Agricultural Property Relief from April 2026.

“It means a revision of plans for those already affected, as well as fresh thinking for the many more families drawn into paying it, and one of the simplest and most effective strategies available is gifting.”