We spend so much of our lives thinking about our next financial goals. Whether that’s buying a house, saving up for a new car, or reaching your investment goal. But ultimately, there comes a point in life when those personal goals are all achieved, and we start to think about gifting money to our children or other younger family members instead.
But knowing when and how to pass on your wealth to the next generation of your family can be a bit of a financial conundrum.
Seeing your adult children benefit from financial gifts while you’re still alive can be very rewarding, especially as the cost of living and property values in the UK continue to rise.
With previous 2024 reports [1] from a Freedom of Information (FOI) request to HMRC showing that over the past ten years there’s been a 48% surge in families choosing to distribute their wealth before their passing, the Wealthify team has surveyed parents of adult children from across the UK to understand how they feel about gifting inheritance early.
Our research found that almost two-thirds of parents (61%) in the UK who plan on leaving cash gifts to children say they’d consider giving inheritance before death.
Take a look at the full results of our study below, considering everything from how much inheritance parents hope to leave, what they’d want their children to do with their inheritance, how parents feel about the current rate of Inheritance Tax in the UK and much more.
Jump to:
- How much do parents want to leave their children?
- Which financial assets do parents hope will make up the bulk of their children’s inheritance?
- How do UK parents want their children to spend their inheritance?
- Why are UK parents considering gifting inheritance early?
- What hesitations do UK parents have about gifting inheritance early?
- How do UK parents feel about Inheritance Tax?
- Parents giving financial gifts
How much do parents want to leave their children?
With two-thirds of parents (61%) considering gifting their children an early inheritance, and nearly half (49%) saying they’ve already given their children financial gifts, financial help from the Bank of Mum & Dad is hardly uncommon today.
It’s clear to see that most UK parents are looking to help their children as much as they can while they’re still here.
However, it’s not pressure from children pushing parents to consider gifting inheritance early — our research found that 9 in 10 (90%) parents say their children haven’t asked.
Rather, the majority (69%) of parents told us that they worry about what life will look like for their children when they’re the same age as them, and another 3 in 5 (59%) believe life is harder for their children than it was when they were their children’s age.
Of the parents thinking about giving inheritance before death (61%), the majority (52%) said they’d give them ‘some’, but not all of it. However, only 1 in 11 (9%) said they’d consider giving their children all their inheritance early.
But just how much inheritance are UK parents hoping to leave their adult children?
Our research found that the average parent leaving inheritance hopes to leave £311,904 for their children. Although most parents (52%) reckon they’ll leave up to £250,000.
Parents in London hope to leave the most, with an average of £521,356, followed by parents in Northern Ireland with £443,334.
Parents in the North East plan on leaving the least – although still coming in at £238,603 – less than half of what London parents hope to give their children.
Which financial assets do parents hope will make up the bulk of their children’s inheritance?
The future is unpredictable, so passing on savings to your children allows you to create a safety net for them even when you’re not there to do so yourself. But exactly which financial assets do parents hope will make up the bulk of their children’s inheritance?
Our research found that the number one asset parents say will make up a large sum of their children’s inheritance is property, with over 4 in 5 (84%) saying this. Following property is ‘general savings’ (58%), ‘pensions’ (19%), ‘Cash ISA’ (19%), and Stocks & Shares ISAs (10%).
However, we also identified that the amount parents leave for their children in inheritance largely depends on the source of it:
We identified that parents who say the bulk of their children’s inheritance will be coming from a Stocks & Shares ISA are planning to leave their children the most, at an average of £478,345. That’s £166,441 more than the average UK parent.
Parents making up the bulk of their children’s inheritance with a Stocks & Shares ISA are also the most likely to say they’d consider gifting inheritance early, with 3 in 4 (74%) doing so, compared to a 61% national average.
Following Stocks & Shares ISAs, pensions were deemed the most lucrative (£354,705) — although still £123,640 less.
Our Stocks and Shares ISA offers a quick and simple way to begin your investment journey. Make your first step towards your new financial future by finding out how to open a Wealthify ISA or transfer an ISA to us today.
How do UK parents want their children to spend their inheritance?
How to spend inheritance money – and more importantly, how to spend inheritance wisely – is one of the most important decisions you will make if you receive a lump sum of money.
Receiving an inheritance can be life-changing, but it often comes at a difficult and emotional time. And without the guidance of the Bank of Mum and Dad, knowing what to do with an inheritance while grieving can be a bit bewildering, to say the least.
When parents give their children financial gifts, they often come with specific instructions on how to spend them.
However, perhaps surprisingly, our research shows that most parents (42%) don’t care what their children do with their inheritance money, simply stating — it’s theirs to enjoy.
We found that the more children parents had, the more likely they were to say this, with 34% of parents of one child selecting this as a reason versus 69% for parents with four children.
Comparatively, the parents who said they would consider giving inheritance before death are 26% less likely to say they don’t care what their children do with their inheritance money than those who said they wouldn’t (56% vs 30%). Suggesting those considering gifting money before death want to have more say in where the money goes.
The second-most popular way parents want their children to spend their inheritance is ‘buying or improving property’, with around two-fifths (38%) saying this.
Following property is ‘investing’ (20%), ‘savings’ (17%), and ‘personal experiences’, like travelling (13%).
Why are UK parents considering gifting inheritance early?
Children pressure their parents in many ways, but despite two-thirds of parents (61%) saying they’d consider gifting inheritance to their children early, we found there isn’t any pressure from children to do this.
In fact, our research found that the vast majority (90%) of adult children haven’t even asked.
Rather, two-thirds (65%) of parents told us the number one reason they would consider giving inheritance before death is so their children don’t have to struggle financially.
Following this, the second most popular reason is so they can see their children reap the benefits of their inheritance while they’re still alive (46%).
Interestingly, over two-fifths of parents (42%) say helping their children avoid losing money due to Inheritance Tax would be one of their top reasons for gifting inheritance early:
What hesitations do UK parents have about gifting inheritance early?
While it's clear to see that parents are considering gifting their children an early inheritance so they can see them enjoy the money, parting with your cash early does come with its risks.
While gifting inheritance early is a generous gesture from parents, you should never make a large financial gift impulsively, and it’s crucial to think carefully about your own current financial needs — and consider what they may look like in the future.
Our research found that the top reservation parents hold when it comes to gifting inheritance early is the potential strain it might put on their own finances (40%).
Following this, parents worry they won’t have enough money to fund elderly care if they need it in later life (32%).
Interestingly, 1 in 4 (24%) parents worry that they’d die within 7 years of the inheritance gift, which as per current inheritance legislation, would cause their children to pay Inheritance Tax.
How do UK parents feel about Inheritance Tax?
Inheritance Tax can cost loved ones tens of thousands of pounds when they inherit money, with the tax forecasted [2] to generate around £8.3 billion for the government in the 2024-2025 tax year.
Our research found that almost two-thirds of parents (64%) worry about their children having to pay Inheritance Tax. But exactly how much is Inheritance Tax?
Currently, in the UK, the Inheritance Tax threshold is £325,000 — rising to £500,000 if you’re leaving your main home to your children too (as long as your total estate including your pension and assets is valued under £2 million) [3]. If you leave an estate larger than this to your children, then the rate of Inheritance Tax is normally 40% on the value above the threshold.
The current Inheritance Tax threshold is frozen at £325,000 until the 2029-30 tax year. However, if you’re married or in a civil partnership, and your partner dies before you do, any unused Inheritance Tax threshold can be transferred to you, potentially increasing your threshold up to a total of £650,000.
However, we found that 4 in 5 (77%) parents think the current rate of Inheritance Tax is too high, with over two-thirds (68%) believing it shouldn’t exist at all.
Parents giving financial gifts
It’s clear to see that parents are becoming increasingly concerned with the amount of Inheritance Tax that bereaved families are paying, forcing a growing trend of people looking at how to pass on money to their loved ones in a tax-efficient way.
If you are relatively young, healthy, and are financially able, giving your children part of their inheritance while you’re still alive can be an effective way to reduce a future Inheritance Tax bill, especially if your estate is likely to exceed the nil-rate band.
Currently, every tax resident of the UK can gift £3,000 per tax year without needing to declare it to HMRC. Plus, some additional gifting allowance if your loved one is getting married or entering a civil partnership (which you can add to the £3,000 allowance).
But if you planned to give a much larger sum, keep in mind the 7-year rule for gift giving before making any decisions: if you live for 7 years after giving a gift, there would be no tax to pay (unless it’s part of a trust). However, if you pass away before the 7-year mark and there’s Inheritance Tax to pay, the amount due would depend on when you gifted it.
Your tax treatment will depend on your individual circumstances, and it may be subject to change in the future.
With investing, your capital is at risk, so the value of your investments can go down as well as up, which means you could get back less than you initially invested.
Wealthify does not provide advice. If you’re not sure whether investing is right for you, please speak to a financial adviser.
References:
1: https://ifamagazine.com/revealed-48-rise-in-inheritance-gifting-lawyers-analyse-the-causes-pros-and-cons
2: https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/inheritance-tax/
3: https://www.gov.uk/inheritance-tax
Methodology:
Survey conducted amongst 750 parents of adult children (18+) in the UK who plan on leaving their children monetary inheritance via 3Gem between the 18th and 21st of February 2025.
