Inheritance Tax Gift Rules UK

The Seven-Year Rule

Gifts you make during your lifetime are called potentially exempt transfers (PETs). They become fully exempt from IHT if you survive for seven years after making them.¹

If you die within seven years, the gift is added back to your estate for IHT purposes. Taper relief may reduce the tax due if you survive between three and seven years.

Annual Exemptions

You can give away up to £3,000 per tax year without it counting towards the seven-year rule. This is the annual exemption. If you don't use it, you can carry it forward for one year only, giving you a maximum of £6,000.²

Annual gift allowance

£3,000 per year

Small gifts exemption

£250 per person, unlimited recipients

Wedding gifts (to child)

£5,000 tax-free

Small Gifts Exemption

You can give up to £250 to as many people as you like each tax year, and these are immediately exempt from IHT. But you can't combine this with the annual exemption for the same person (you can't give someone £3,250 and claim both).³

Gifts to Spouses and Civil Partners

Gifts between spouses or civil partners are completely exempt from IHT, with no limit, as long as both are domiciled in the UK. This applies during life and on death.

Regular Gifts from Income

Gifts made out of your regular income (not capital) are exempt if they leave you with enough income to maintain your usual standard of living. Examples include paying a child's rent or contributing to grandchildren's school fees.

Taper Relief

If you die within seven years of making a gift, taper relief reduces the IHT due based on how long you survived:

Taper relief only applies to gifts above the nil-rate band (£325,000). If the gift is within the nil-rate band, no IHT is due anyway.