If you’ve spent years building wealth, there’s a point where the question shifts from how to grow it to what to do with it. Should you enjoy it while you can? Pass it on to family now? Or preserve it for future generations?
There’s no one-size-fits-all answer, especially in 2025, with changing tax rules, rising living costs, and more people rethinking the purpose of their money. This article will explore for you the three main options many are weighing up: spending, gifting, and saving for inheritance.
Spend It – The Upside of Prioritising Yourself
Many people reaching retirement or beyond are choosing to enjoy the wealth they’ve worked so hard to build. Travel, hobbies, home improvements, time with family, spending on experiences and comfort have become a growing priority.
There’s also a practical aspect to this. With life expectancy rising, it’s important to ensure your money supports you for the long haul. If you don’t know how long you’ll live or what you might need later in life, enjoying what you can today (within reason) is a fair choice.
On the flip side, spending freely could reduce your ability to support others down the line, financially or otherwise. And without a plan, it’s easy to underestimate how long your wealth needs to last.
Gift It – How Much Can You Give Without the Taxman Calling?
Gifting during your lifetime is one way to support loved ones while potentially reducing future inheritance tax (IHT) liability. Plus, you get the joy of seeing the impact first-hand.
Here are a few allowances to know about:
- £3,000 Annual Gift Allowance – You can gift up to £3,000 per tax year without it counting toward your estate. This can be carried forward one year if unused.
- Small Gifts – Gifts of up to £250 per person, as long as they haven’t already received a portion of your £3,000.
- Wedding Gifts – Up to £5,000 for a child, £2,500 for a grandchild, or £1,000 for others – tax-free if given before the wedding.
- Regular Gifts from Income – If you have surplus income, you can make regular gifts as long as it doesn’t affect your lifestyle.
Gifting not only supports your family when they may need it most (e.g. first homes, childcare, education), but also gives you more control over where your money goes. Just be mindful of the seven-year rule, gifts over your annual allowances may still be subject to IHT if you pass away within seven years of giving them.
Save It – Why Some Still Focus on Legacy
For others, preserving wealth for the next generation is a key goal and it’s easy to see why. Rising house prices, student debt, and the cost of living make financial support from parents and grandparents more important than ever.
Saving for inheritance also creates the opportunity to build structured, tax-efficient legacies, whether through trusts, pensions, or investment portfolios. But it’s not without a lot of complexities.
In 2025, one of the biggest upcoming proposed changes is the inclusion of unused pension funds in IHT calculations from April 2027. This could reduce what your beneficiaries receive, especially if your estate exceeds the nil-rate band (£325,000) or if pension funds are significant.
It’s also worth noting that leaving everything until death can increase tax exposure. Strategic giving earlier in life may be more effective and appreciated.
What the New IHT Rules Mean for Your Decision
The IHT landscape is shifting. Pensions, once considered outside the IHT net, are now included from 2027 onwards. That, combined with tighter gifting and relief thresholds, means that proactive planning is very important.
A balanced approach, gifting while alive, using allowances, and structuring your estate carefully, can help minimise tax and maximise the positive impact of your wealth.
Make a Decision That Reflects Your Values
Whether you spend, gift, or save, the most important thing is that your wealth reflects your goals, not just your spreadsheet.
For some, that means living well and making lasting memories. For others, it’s helping family build their future. And for many, it’s a bit of both.
Not sure what’s possible for you? Let’s talk.
📞 Call us on 020 8366 4400 or email enquiries@cedarhfs.co.uk to start the conversation.