UK to Introduce £3,000 Annual Gifting Allowance as Inheritance Tax Rules Change in 2027

The incoming administration of Prime Minister Andy Burnham will amend UK inheritance tax legislation effective April 2027. Pensions that remain after death will become taxable assets, expanding the pool of estates liable for inheritance tax.

Financial advisers say individuals can now transfer up to £3,000 per year to children or other recipients without incurring tax, and a separate “surplus income” provision also allows tax‑free gifts if proper records are kept. The existing nil‑rate band of £325,000 – unchanged since 2009 – and the residence uplift to £500,000 remain in place. Unlimited transfers to a spouse, civil partner or charity continue to be exempt, and unused allowances can be passed to a surviving partner, allowing married couples to shield up to £1 million.

Presenter Paul Lewis on BBC Radio 4’s Moneybox noted, “Inheritance tax is probably the most hated of all taxes – even though 19 out of 20 estates do not pay it.” The changes are prompting many to consider gifting strategies now rather than waiting until death.