Thinking of giving a big gift to your kids or grandkids? Here’s a crucial inheritance tax tip in under 2 minutes.

A PET (Potentially Exempt Transfer) is a gift (cash, property, shares) that becomes tax-free if you survive 7 years after making it.
If you die within 7 years, the gift could be subject to Inheritance Tax up to 40%, reducing gradually through Taper Relief.
To cover this risk, consider a Gift Inter Vivos life insurance policy – it provides a payout if you pass within 7 years, protecting your loved ones from surprise tax bills.
Costs start from about £7/month (healthy individuals, modest cover), increasing with age, health, and gift size.
Important: From April 2027, most pensions will fall within your estate for tax – making gift planning and protection even more vital.

👉 Bottom line: Don’t let a generous gift create a tax headache. With the right planning and cover, your family keeps the full benefit.
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Gifting, Inheritance Tax, and PETs: What You Need to Know

Thinking of giving your children or grandchildren a lump sum, property, or another significant gift? It’s a generous move — but without proper planning, it could carry hidden tax consequences.

The good news is that many gifts can fall outside Inheritance Tax (IHT) if structured correctly. These are known as Potentially Exempt Transfers (PETs).

What is a Potentially Exempt Transfer (PET)?

A PET is any gift you make to an individual — whether it’s cash, property, or shares. If you survive seven years after making the gift, it becomes fully exempt from IHT.

However, if death occurs within seven years:

• In the first three years, the gift could face the maximum 40% IHT charge.

• From year 3 to 7, Taper Relief reduces this liability, until the gift becomes tax-free at year 7.

Protecting Gifts with Gift Inter Vivos Insurance

One way to safeguard your gift during that seven-year window is through a Gift Inter Vivos policy.

• This is a special type of life insurance designed to cover the declining IHT liability over the 7 years.

• Premiums are typically affordable at the outset — starting from around £7 per month for healthy younger individuals (higher for larger gifts, older ages, or health conditions).

• The policy’s coverage reduces each year in line with taper relief, making it cost-efficient.

• Importantly, the payout goes directly to your beneficiaries, giving them the funds to pay any tax without dipping into the gift you intended for them.

Why It Matters More After 2027

Until recently, many people relied on pensions as an IHT-efficient way to pass on wealth. But from April 2027, unless rules change, most pension pots and death benefits will fall inside your estate, potentially facing IHT.

This means alternatives — like PETs combined with Gift Inter Vivos cover — are becoming a crucial part of inheritance planning.

Key Takeaways

• Generous gifts should be protected. Without planning, they may create a tax burden if you pass within 7 years.

• Gift Inter Vivos insurance provides peace of mind, covering the liability during those years.

• Pension rules are changing in 2027, so now is the time to review and update your strategy.