It is a great time to be a rich kid in Britain, according to the advisers, lawyers and accountants of wealthy families.

While rumours of a wealth tax swirl in Westminster, and with tougher inheritance tax (IHT) rules looming in the new tax year, wealthy parents are starting to give away their assets and sign over parts of their businesses to their children – in some cases, decades sooner than they had planned.

John Spencer, the director of GPS Marine, a marine infrastructure specialist based in Rochester, Kent, is one of many entrepreneurs taking advantage of tax rules that allow wealth to be given away prior to death to reduce a possible IHT bill. Gifts made seven years before someone dies are not subject to IHT, while those given three to seven years before death are taxed on a sliding scale known as “taper relief”. The rate reduces each year from 32% to 8%.

It is one way of cushioning the looming loss of two major tax reliefs: business property relief (BPR) and agricultural property relief (APR). The changes prompted thousands of farmers from across the country to protest in London.

Big family enterprises, which previously did not have to pay any IHT when the business was handed to the next generation, will face tax of 20% on its value above £1m, starting from next April.

It means, without any action, that Spencer’s company, which is worth around £20m, could attract an inheritance tax bill of as much as £4m.

“I have split my shareholdings with my wife and we are starting to give away assets, £1m each to our sons,” he says.

Spencer, 66, says he can no longer make big investment decisions without making a provision for IHT in cash, as the tax now poses “an ever-present threat to the survival of the business”.

“When we spend, it increases the value of the business and how much we have to put away,” he says. “Nobody wants to invest, everyone is just battening down the hatches and weathering out the storm.

“The really sad thing is that the losers are the guys who work for us. We have had to reduce our head count by 30%.”

When Rachel Reeves announced the changes in her first budget last year, the Office for Budget Responsibility projected that it could net the Treasury £500m a year from 2027-28, and HMRC estimated that about 2,000 more estates would pay more tax after the change.

But very wealthy families are rearranging company ownership structures, setting up trusts and giving away assets to get around the new rules, some advisers have said.

When shares in a business that would have qualified for business property relief are moved into a trust, a different set of tax rules kick in. After the new £1m cap for BPR takes effect in April next year, HMRC will be able to charge up to 6% on the relevant assets above that allowance on every 10-year anniversary of the trust. For many inheritors, this will be a more attractive option than facing 20% tax.

Trusts set up before the changes were announced will be treated differently for IHT purposes.

The billionaire family who run the Glasgow-based secondhand car dealer Arnold Clark Automobiles rearranged the ownership of their business two days before Reeves’s budget last year.

The dealership, which has 200 branches across the UK, was founded by the late Sir Arnold Clark in 1954. It is now chaired by his widow, Lady Philomena Butler Clark, and is family-owned. Last year it made a pre-tax profit of £120.7m on revenue of £5.15bn.

Two of Clark’s sons, John Clark and Adam Clark, were among the 12 shareholders who transferred their shares to 10 new shareholders, who appear to be trustees.

A spokesperson for Arnold Clark Automobiles said the changes to the shareholdings were part of a “planned process” of succession planning over a number of years.

“As will no doubt be the case for most family-owned businesses, the Clark family had been engaged in discussions with their advisers regarding succession planning for Sir Arnold’s children for a number of years, reflecting both the age profile of the second, and indeed third, generation of the family and the need to provide future certainty and stability to the Arnold Clark Group, which employs over 11,000 people.

“The changes to the shareholdings were part of that planned process.”

Other prominent British family businesses have also made changes. Also in October last year, the owner of the Glastonbury festival, Sir Michael Eavis, 89, reportedly gave his shareholding in the company that runs the annual summer event to his daughter Emily, 46.

‘There is a lot of gifting down to the next generation’

Charlie Sosna, the head of private wealth and tax at the law firm Mishcon de Reya, says many of his clients are starting to give away their wealth to their children but are trying to do so in a sensible manner.

“They have considerable wealth and they are worried about that being in the name of their children if they are not ready,” he says.

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Wealth or assets, including shares in a company, given as a gift to a family member are not subject to inheritance tax if the person making the gift survives for seven years.

But the government is looking at ways it could tighten the rules on gifting too, such as a lifetime cap to limit the amount of money or value of assets an individual can donate as part of their IHT planning.

David Denton, the head of technical services at the wealth manager Quilter Cheviot, says there has been a rise in interest from wealthy people in taking out big life insurance policies, which could help their children cover the cost of a large inheritance tax bill after their death.

Life insurance policies held in the right kind of trust do not form part of the deceased’s estate and can pay out before probate is granted, meaning heirs are not forced to sell assets quickly to pay HMRC within six months of the death.

Too big to catch

There are concerns that the complex methods used by wealthy families to lower their inheritance tax bill will undermine a broader effort by the government to tax wealth more effectively. But Stuart Adam, of the thinktank the Institute for Fiscal Studies, argues it should not deter pushes for change.

“Yes, some people will do this, but that shouldn’t stop change from going ahead,” he says.

Angus Hanton, of the Intergenerational Foundation thinktank, says in some cases the passing of wealth to younger family members is a positive for intergenerational equality.

“One of the effects of the changes is that people get money when they need it more, when they are younger, rather than in their 50s when they perhaps need it less.

“I think sometimes it is underestimated how much people will react to changes in tax,” he says. “There’s going to be a lot of gifting going on, especially as there have been reports of the idea of a lifetime giving cap.”

It means the tax authority is likely to have to wrestle with increasingly complex IHT plans, even as evidence suggests it already struggles to identify how much tax the super-rich pay on their assets. This summer, a report by parliament’s public accounts committee found that HMRC could not pinpoint how much tax the nation’s billionaires pay on their wealth.

The cross-party group of MPs found HMRC does not have a list of billionaires in the UK, and also does not have a legal mechanism for collecting information on taxpayers’ wealth.

Chris Etherington, of the accountants RSM, notes that in areas such as inheritance tax policy, HMRC does not have fully digitalised systems.

“They’ve got the data, they just don’t have it in the systems,” he says. “I think it’s changing, but sometimes you get a reply back saying: ‘It’s going to take us too long.’”

A spokesperson for HMRC said: “The government is determined to ensure everyone pays the right tax. Extra resources, including 400 officers specialising in wealthy and offshore tax, were announced in the recent spending review, allowing us to significantly step up work on closing the tax gap amongst the wealthiest.

“We’re committed to delivering a digital inheritance tax system for 2027-28 to make the process quicker and easier.”