How wealthy families are slashing their inheritance tax bills before Rachel Reeves's pension raid

Affluent British families are ramping up their philanthropic activities as a strategy to minimise inheritance tax exposure before planned changes to pension taxation take effect in 2027.

**ARE YOU READING THIS ON OUR APP? DOWNLOAD NOW FOR THE BEST GB NEWS EXPERIENCE**

Research indicates that 53 per cent of high-net-worth parents have boosted their charitable contributions during the previous 24 months.

The trend comes as frozen tax-free allowances and forthcoming inclusion of pensions within taxable estates from April 2027 threaten to significantly increase death duties for wealthy households.

Donations to registered charities remain exempt from inheritance tax, whilst estates leaving at least 10 per cent to charitable causes benefit from a reduced tax rate of 36 per cent rather than the standard 40 per cent.

Gift Aid provides additional benefits for lifetime charitable contributions, increasing donation values by 25 per cent.

Higher-rate taxpayers can claim further relief via self-assessment returns, making philanthropy particularly tax-efficient for wealthy individuals.

These mechanisms offer legitimate methods for reducing overall tax liabilities whilst supporting charitable causes.

Leaving money to charity is completely free from inheritance tax, meaning families can choose to give to causes they care about instead of handing more to HMRC.

The mix of inheritance tax breaks and income tax relief makes giving to charity an attractive option for wealthy families, especially with new pension tax changes on the way.

New research shows that 75 per cent of wealthy parents are worried that leaving too much money to their children could have a negative effect on their lives. Among parents with over £3 million in assets, 61 per cent fear their children might not use the money wisely.

Additionally, 57 per cent of affluent parents believe their adult children already possess sufficient financial resources and prefer directing their wealth elsewhere.

Rising incomes and aspirations to improve society were identified as primary motivations behind increased charitable giving amongst this demographic.

These concerns about inheritance effects, combined with mounting tax pressures, are driving more wealthy families towards philanthropic solutions for estate planning.

Gemma Gooch, Head of Charities Distribution at Rathbones, observed: "Our analysis shows many wealthy parents, already concerned about inheritance tax, fear the impact of too big an inheritance on their children's aspirations and drive.

"It is therefore no surprise that more are increasingly turning their attention to charitable giving."

She explained that integrating philanthropy into financial strategies enables parents to establish significant legacies whilst supporting meaningful causes.

"Incorporating charitable giving into financial planning allows parents to create a meaningful legacy, support causes close to their heart and potentially pass on a greater share of their estate to their chosen beneficiaries, rather than the taxman," Gooch added.