A recent news article about football legend Jack Charlton may serve as a timely reminder to millions of households across the UK. Footie fans will know that Jack, who died in 2020, was part of the squad that beat West Germany 4-2 in the 1966 World Cup, the only time England has ever won the prestigious tournament.
According to the article, his son, John, recently said that he will need to pay a £200,000 in Inheritance Tax (IHT) if he wants to keep his dad’s World Cup winner’s medal. As a result he has had to hand the precious keepsake to his mum, even though Jack passed the medal on to his son.
While certain military medals are exempt from IHT when they’re left to loved ones, this doesn’t usually extend to sporting medals. As you can imagine, discovering an item of huge sentimental value, such as Jack’s medal, is liable to a significant IHT liability could come as a nasty shock to loved ones at a difficult time for them.
Yet millions of families across the UK could find themselves in this situation after announcements made by former Chancellor, Rachel Reeves. Read on to learn more and why gifting assets might be something you want to consider to potentially reduce your estate’s exposure to IHT.
Before you do, let’s look at what IHT is in more detail, and how it’s charged.
Generally speaking, IHT is the tax owed on the value of your estate upon death
Most of your belongings, including savings, investments and property, fall into your estate when you die. If the value of your assets is greater than your nil-rate band (NRB), which is the amount you can have in your estate before IHT is charged, the tax is charged on the belongings that exceed the allowance.
In 2026/27, the NRB is £325,000 per person, you can usually combine your and your spouse’s NRB if you’re married or in a civil partnership, providing a total of up to £650,000. If you’re eligible for the Residence Nil Rate Band (RNRB), which provides an additional £175,000, your allowance could be up to £500,000 as a single person, or £1 million if you’re married or in a civil partnership.
As IHT is typically charged at 40%, it has the power to significantly reduce the amount your loved ones receive from your estate. Worse still, in 2025, the then Chancellor Rachel Reeves froze the NRB until April 2031, which may mean they could be liable to receive even less.
Let’s look at that in more detail next.
Why could my estate’s exposure to IHT increase substantially?
If between now and 2031 your assets continue to increase in value while the NRB remains static, a greater proportion of your estate will become liable to IHT. Yet that’s not the only reason more and more estates could become liable to the tax.
Another reason is Rachel Reeves’ decision to include the unused element of pension pots in IHT calculations after April 2027, which means they could (if applicable) also become liable to the tax. When you consider that pensions can be one of the largest assets people own, sometimes exceeding the value of their home, it’s likely to leave millions of families with a significant IHT tax charge.
While this makes for sombre reading, there is some good news as HMRC allows certain gifts that could help to lower the value of your estate, and consequently, its exposure to IHT. If your gifts reduce the value of your estate to within your NRB threshold, then IHT would not normally be charged.
How much can I gift to loved ones in a tax year?
You’re allowed to make certain gifts every tax year, which fall outside of your estate for IHT purposes as soon as you make them.
In 2026/27, you can gift:
£3,000 to one person or shared between many. In certain situations, you may be able to carry this forward, meaning you could gift £6,000 the following tax year
up to £250 to as many different people as you like. Please note that if the total amount of gifts made to the same person exceeds £250, this exemption no longer applies
between £1,000 and £5,000 in wedding gifts to specific individuals
gifts of any amount from monthly income, providing they’re made regularly and don’t reduce your standard of living.
Can I give larger gifts to reduce my estate’s exposure to IHT?
You can give gifts of any amount to as many people as you would like to, however they don’t fall outside of your estate for IHT purposes straight away. Instead, these gifts, which are known as ‘absolute gifts’ or Potentially Exempt Transfers (PET), only become liable to IHT at 0% if you live for seven years after giving it away.
While making a larger gift may sound like a financially savvy strategy, care should always be taken. This is because you should always consider the long-term impact on your financial security as you’ll need to fully relinquish ownership of any cash, property or assets you give away.
So for example, if you gift a holiday home but continue to use it during breaks without paying rent at the market value, it will automatically fall back into the estate IHT calculation.
As such, it’s vital to ensure that you’ll be financially secure without the money or assets. For example, if in the future you can no longer maintain your standard of living you cannot demand the money back from those you’ve given it to.
A financial adviser can help you understand the potential benefits and risks that gifting may hold, and whether it’s the best option for you.
How can AFH help me?
If you’re thinking about making a gift as part of your IHT mitigation and wealth management strategy, and would like to understand the potential implications, please call us on 0333 010 0008.
We can arrange a no obligation meeting with one of our advisers who will explain the options available to you and whether gifting is something you should consider.
For more information on IHT and what it might mean for you, please feel free to download our informative guide.
13 August 2026