Sales of annuities and gifting of homes and cash to family members have soared in the last few months as fears grow over Chancellor Rachel Reeves’ changes to inheritance tax rules. Sales of annuities soared 20% in 2024 to £7 billion, while the number of properties exchanging hands for free is expected to increase by more than 45% to around 220,000 a year.
Under current inheritance tax rules, families are allowed to gift large sums of cash and/or assets tax-free in the seven years before they die. Inheritance tax was described as a “meal ticket” for HM Revenue and Customs and is levied at 40% on assets left by someone after they die.
By choosing to take out an annuity, the saver’s pension cash is no longer invested and the only tax payable will be income tax,but only if a pension income exceeds a saver’s personal tax-free allowance.
Pete Cowell, head of annuities at Standard Life, part of Phoenix Group, said Brits were increasingly choosing to access their pension now following changes to inheritance tax announced in October’s Budget. Standard Life found that third of savers are considering giving away money to family members more regularly to reduce their inheritance tax liabilities.
He said: “We anticipate demand for annuities will remain strong, particularly with changes from the October Budget bringing pensions into scope for inheritance tax from 2027.
“The change is likely to encourage wealthier savers to access more of their pensions and annuities are proving an attractive way of doing so.”
Parents across the UK are also racing to pass on the family home to their children in a bid to avoid big inheritance tax bills.
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.
Roughly 130,000 properties are given away each year, according to the Land Registry data obtained via a freedom of information request by Hamptons and reported by PropertyIndustryEye.
Projections show it will reach around 220,000 in 2024.
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.”
PropertyIndustryEye also reported that assets given three years before death are taxed at 40%, and gifts made between three and seven years before death are subject to tapering.
