Bank of Mum and Dad in Recession as Money Gifting Falls

Research released by Quilter has found that the volumes of financial gifts by parents to children, the so called “Bank of Mum and Dad” or BoMaD, have been falling.

The annual gifting allowance of £3,000 per year has been frozen for 44 years.  That’s 1981.  According to the Bank of England’s own inflation calculator, if the £3,000 allowance had been increased in line with the Consumer Prices Index (CPI) to £11,633.95 as at July 2025.

The reality is that it is becoming even more difficult to make financial gifts from hard earned and already taxed capital to our loved ones as you must survive for 7 years after making a gift of more than £3,000 for it then to be outside the estate on death.

Added to this, pension funds will also become part of the estate on death from April 2027 meaning the government appears to be using even more of our already taxed wealth as a revenue raiser.  Records are being continually set each year for record revenues to the Treasury from inheritance taxes.  Is it any wonder that research found that 13% of parents plan to cut back on gifting and these figures increase to 16% for younger retirees.

Combine all the above with the squeeze on cost of living, personal tax allowances being frozen and ever more pensioners now paying income taxes, it is no wonder that the numbers on financial gifts are falling.

Comment

Inheritance tax is an unfair tax.  We keep calling it a tax on wealth that has already been taxed and for so many people that have built up wealth through hard work and saving, it feels like another ‘kick in the teeth’.

We suggest there should be a complete overhaul of the inheritance tax system.

• £3,000 annual gifting allowance should at least be increased to £9,000 to try and bring it up to date.
• Unused pension funds should never be taxed at 40% on death.  This is theft.  You may have received income tax relief on contributions at 20% or for some, 40% and for employer contributions at corporation tax rates of between 19% and 25%, so why 40% death taxes?
• Why not simply make all pension payments to beneficiaries subject to income tax for the beneficiary, in the same way that the pension member would pay income taxes if they had received their pension?
• We suggest that 2^nd and 3rd generation inherited wealth should face some form of tax, either on death at say 50% or 25% Lifetime Transfer Tax if gifted in life to individuals or trusts.
• 1^st generation inherited wealth should not face inheritance taxes.
• If you had paid your own care fees in later life, the balance of your estate should not then be taxed on death.

There are too many disincentives to save, build up wealth and to try and ‘better’ yourself. 

• This country appears to reward those that do not save, spend all their money or rarely work and then claim benefits, pay little or no national insurance contributions, get homed for free, no council tax to pay, free prescriptions and no care fees to pay in later life. 
• We know this may be controversial and we know not all benefit claimants want to be claiming and many do need help but we also all likely know someone who does very little and gets so much.