The catch is that the gifts must be regular (or at least there was an intention they would be regular), that the money comes from income (not capital) and that the quality of life of the donor does not suffer as a result.
Your executor must be able to prove the gifts meet these requirements, so detailed record-keeping is essential. Accountants suggest keeping bank statements and running a basic profit and loss summary showing income and outgoings.
One neat way of making sure your carefully laid plans aren’t unwound by HMRC after your death could be to use your state pension payments. If you have a decent workplace pension and other investments, and little or no debt, it should be fairly easy to prove that the state pension you receive is “surplus”, to the extent that you don’t strictly need it to maintain your lifestyle.
By April 2025, the full state pension will be very nearly £12,000 a year. A simple spreadsheet showing monthly state pension payments coming into your account and then going out again to your children or grandchildren should pass HMRC’s test, all other things being equal (although of course there’s no way to say for certain until the time comes).
As the other legitimate ways to swerve death duties get squeezed or abolished entirely, you can be sure HMRC will be paying more attention to claims against this lucrative relief.
At the moment, only 500 or so estates make use of it every year – you can bet on the Chancellor’s fringe that figure will rise quickly now.
We have 12 months until Ms Reeves next reveals the contents of her red briefcase, there’s no time to waste.