Speculation is mounting that HM Revenue and Customs (HMRC) is preparing to clamp down on financial support from the so-called “Bank of Mum and Dad”. Reports suggest the government could cut the current £3,000 annual tax-free gift allowance, a move critics say would have a “drastic effect” on families across the UK.
The potential change has drawn widespread criticism, with financial experts warning it risks penalising parents and grandparents who regularly provide financial help to younger generations. Concerns centre on how the measure could affect everything from first-time buyers saving for a deposit to students covering education costs.
A move branded “daft” by industry experts
Scott Gallacher, Director at Leicester-based Rowley Turton, was scathing in his assessment of the proposal.
“I can’t believe the Chancellor would be daft enough to cap family gifts,” he said.
He added that the policy risked turning ordinary people into accidental tax dodgers:
“All it would achieve is turning grandparents into overnight tax evaders, with cash gifts to children and grandchildren rocketing to avoid what many already see as an unfair tax.”
Families rely on gifts to make ends meet
Financial coach Benjamin Beck emphasised how vital family support can be, particularly during the ongoing cost-of-living pressures.
“Family gifts can be the difference between affording a deposit, keeping up with bills, or accessing good education,” he explained.
Beck went on to criticise the timing of the rumoured move:
“Tightening the allowance risks cutting off this support at the very moment it is needed most. This will affect the many, not just the few – which is surprising considering Labour’s slogan is ‘for the many, not the few’.”
“A blatant attempt to tax the Bank of Mum and Dad”
David Stirling, adviser at Mint Wealth, echoed these concerns. He labelled the proposal:
“A blatant attempt to tax the Bank of Mum and Dad.”
Stirling issued a stark warning about the wider impact on British households:
“From everyday living expenses to help with property deposits, this support is essential. Reeves risks taxing the very transfers that hold families together.”
Existing rules already apply to gifted deposits
Currently, families face a number of checks and conditions when gifting money, particularly for property purchases.
Mortgage lenders require written confirmation that any gifted deposit is an outright gift, with no expectation of repayment or ownership in the property. Donors must also provide ID and proof of funds to comply with anti-money laundering regulations.
If money is loaned rather than gifted, this must be declared to the lender, as it directly affects the buyer’s affordability assessment.
Political pressure mounts
The speculation places Chancellor Rachel Reeves under pressure, with critics arguing that the rumoured clampdown contradicts Labour’s core messaging. The move, if confirmed, could fuel debate over whether the government is unfairly targeting families during a period of financial strain.
For now, the changes remain unconfirmed, but the growing backlash suggests HMRC’s next steps will be closely scrutinised.
Final Summary:
HMRC rumoured to cut tax-free gift allowance.
The suggestion that HMRC could reduce the £3,000 annual tax-free gift allowance has triggered alarm among financial experts and families alike. While the government argues inheritance tax reform is overdue, critics believe this move would undermine intergenerational support at a critical time.
With rising living costs, many households depend on the generosity of parents and grandparents to cover essentials, deposits, and education. If the proposals go ahead, careful financial planning will become even more important, with trusts and structured gifting strategies taking centre stage. Until the policy is confirmed, speculation will continue to dominate conversations but the backlash already highlights just how much families rely on the “Bank of Mum and Dad”.
