Nearly half (45 per cent) of high net worth individuals (HNWI) have no written record of what they have gifted to loved ones, research from Charles Stanley has found.

Around three in 10 (29 per cent) relied on keeping mental notes on what they had gifted or planned to gift, while 17 per cent had no record of what they had gifted in their lifetime.

Charles Stanley, which is part of Raymond James Wealth Management, said while financial gifts were a smart way to manage inheritance tax (IHT), this was only if the right records were kept and put in writing.

Furthermore, a lack of detailed written records on what had been gifted could leave loved ones with potentially costly and unexpected tax bills.

Almost half (48 per cent) of HNWIs had a written list of exactly what they had gifted or planned to gift.

Despite many lacking written records, 97 per cent of HNWIs had made or planned to make some form of financial gift to family members or friends.

Of those who made financial gifts over the past year, the average amount was £8,367, far exceeding what individuals can give away under the current gifting rules of up to £3,000 each tax year.

Looking at different generations, Baby Boomers gifted an average of £11,756 in the past year, while Generation X had gifted an average of £6,795.

“Making financial gifts is one of the best ways to offset IHT, and is seeing a growth in popularity as a way to transfer wealth from generation to generation,” Charles Stanley director of financial planning, Harry Bell, said.

“With IHT thresholds also remaining frozen and private pensions set to be included in estate valuation from 2027, gifting will only become more popular as a tool for families to pass their wealth on.

“However, our research shows that there is a concerning lack of understanding around gifting and the potential unintended consequences if not done appropriately.

“Making gifts by the book is what really matters. While many claim to keep a record of what gifts have been made, it’s only those with written records that HMRC can track.

“Any other gifts made without justification will be liable to IHT if the estate threshold exceeds £325,000. Seeking professional advice is highly advisable when it comes to estate planning.

“Not only can advisers support clients with achieving their wealth plans, but can help make the most of all tax-efficient vehicles and allowances to simplify estates left behind.”

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