You can give away up to £3,000 each tax year completely free of inheritance tax under the annual exemption, and you can add unlimited small gifts of up to £250 per person, along with certain wedding gifts. Larger amounts are usually tax free too, as long as you live for seven years after making the gift.
Those rules mean most everyday gifts never trouble inheritance tax at all. The complications tend to arise with larger, one-off gifts made later in life, where the seven-year clock and taper relief come into play. This guide sets out each exemption, the figures behind it, and how the seven-year rule works, for England and Wales. The same inheritance tax rules apply across the UK, and figures are current as at August 2026 and subject to change.
The gifts you can make tax free every year
Inheritance tax is charged at 40% on the part of an estate above the available tax-free thresholds, so gifts made during your lifetime can reduce a future bill (gov.uk, Inheritance Tax, as at August 2026, subject to change). Several exemptions let you give money away with no inheritance tax consequences, whether or not you go on to survive seven years. They can be combined, though the same gift to the same person cannot use two allowances at once.
| Exemption | Amount (2026-27) | How it works |
|---|---|---|
| Annual exemption | £3,000 per tax year | A total across all gifts. Any unused part can be carried forward one year only. |
| Small gifts exemption | £250 per person | Unlimited number of people, provided no other exemption is used on the same person. |
| Wedding or civil partnership gifts | £1,000 to £5,000 | Depends on your relationship to the couple. See the table below. |
| Normal expenditure out of income | No fixed limit | Regular gifts from surplus income that do not affect your standard of living. |
| Gifts to a spouse or civil partner | Unlimited | Transfers between UK-domiciled spouses and civil partners are generally exempt. |
Source: gov.uk, gifts and Inheritance Tax, as at August 2026, subject to change. The annual exemption is £3,000 and small gifts are £250 per person each tax year.
A practical point on the annual exemption: if you did not use it last year, you can carry the unused part forward for one tax year only, so a couple who made no gifts last year could potentially give £12,000 between them this year (two years of £3,000 each). The small gifts exemption is separate again, so birthday and festive gifts of up to £250 a person sit outside that £3,000.
Wedding and civil partnership gifts
You can give a tax-free gift when someone marries or forms a civil partnership, with the amount depending on your relationship to them. This exemption can be used on its own or alongside the annual exemption for the same person, which is one of the few times two allowances can stack.
| Your relationship to the couple | Tax-free wedding gift |
|---|---|
| Your child | Up to £5,000 |
| Your grandchild or great-grandchild | Up to £2,500 |
| Anyone else | Up to £1,000 |
Source: gov.uk, gifts and Inheritance Tax, as at August 2026, subject to change. The gift should be made on or shortly before the wedding or ceremony.
Regular gifts from your income
One of the most useful and least understood exemptions is normal expenditure out of income. Gifts that form a regular pattern, are made from surplus income rather than capital, and leave you able to maintain your usual standard of living are immediately exempt, with no upper limit and no seven-year wait (gov.uk, as at August 2026, subject to change). Paying a grandchild's school fees or contributing monthly to a relative are common examples. Keeping a simple record of your income, outgoings and the gifts helps show the pattern, because the exemption is judged on the facts.
The 7-year rule on larger gifts
Gifts above the exemptions are known as potentially exempt transfers. There is no tax to pay when you make one, and no tax at all if you live for seven years afterwards. If you die within seven years, the gift is counted back into your estate and may use up part of your nil-rate band, which stands at £325,000 (gov.uk, Inheritance Tax, as at August 2026, subject to change). Only where gifts in the seven years before death exceed that nil-rate band does tax fall due on the gift itself.
Make a gift, survive seven years, and it leaves your estate entirely. Die sooner, and it is added back, though taper relief may reduce the tax.
How taper relief reduces the tax
Taper relief is widely misunderstood. It reduces the tax on a gift, not the value of the gift, and it only applies where a gift is large enough to be taxable in the first place, meaning gifts totalling more than the nil-rate band in the seven years before death. Where it applies, the rate charged on the gift falls the longer you survived after making it.
| Years between gift and death | Rate of tax on the gift |
|---|---|
| Less than 3 years | 40% |
| 3 to 4 years | 32% |
| 4 to 5 years | 24% |
| 5 to 6 years | 16% |
| 6 to 7 years | 8% |
| 7 or more years | 0% |
Source: gov.uk, gifts and Inheritance Tax, as at August 2026, subject to change.
- Annual exemption: £3,000 a tax year, carry unused forward one year (gov.uk).
- Small gifts: £250 per person, unlimited recipients (gov.uk).
- Wedding gifts: up to £5,000 (child), £2,500 (grandchild), £1,000 (other) (gov.uk).
- Larger gifts: tax free if you survive 7 years (gov.uk).
- Nil-rate band: £325,000, frozen until 5 April 2031 (gov.uk).
Gifting, care fees and other things to weigh
Giving money away is not only an inheritance tax question. If a local authority later assesses you for help with care costs and decides you gave assets away mainly to avoid paying, it can treat you as still owning them under the deprivation of assets rules. That is a separate test from the seven-year inheritance tax rule, and there is no fixed time limit on it, so timing and motive both matter. Our guide to planning for the impact of care fees looks at this in more detail.
A few further points are worth keeping in mind. Gifts you continue to benefit from, such as giving away a home but still living in it rent free, are caught by the gift with reservation of benefit rules and may stay in your estate. From 6 April 2027, most unused pension funds and death benefits are due to be brought within the value of an estate for inheritance tax, a change announced at the Autumn Budget 2024 (gov.uk, as at August 2026, subject to change), which may affect how families think about lifetime giving. Because gifting sits within a wider picture of inheritance tax allowances and your overall estate plan, many people take advice before making a large gift. If you would like to talk it through, you can contact our team.
Frequently asked questions
How much money can you gift tax free in the UK?
You can give away up to £3,000 in total each tax year under the annual exemption, plus unlimited small gifts of up to £250 per person, and certain wedding gifts, all free of inheritance tax. Larger gifts are usually tax free too if you live for seven years after making them (gov.uk, as at August 2026, subject to change).
Can I gift more than £3,000 a year?
Yes. The £3,000 annual exemption is only one of several allowances. You can also make small gifts of £250 per person, wedding gifts, and regular gifts from surplus income. Beyond those, larger gifts are potentially exempt and become fully tax free once you have survived seven years (gov.uk, as at August 2026, subject to change).
How much can I give my child tax free?
There is no special parent-to-child allowance beyond the general exemptions. A parent can give a child up to £3,000 a year under the annual exemption, up to £5,000 as a wedding gift, and larger sums that become tax free after seven years. The general rules apply in the same way whoever the recipient is (gov.uk, as at August 2026, subject to change).
Do I pay tax on money I receive as a gift?
Generally no. In the UK it is the estate of the person who made the gift, not the person receiving it, that may face inheritance tax, and then only if the giver dies within seven years and their gifts exceed the available thresholds. Income tax can apply to any interest a gift later earns (gov.uk, as at August 2026, subject to change).
What is the 7-year rule on gifts?
Gifts above the exemptions are potentially exempt transfers. No tax is due when you make them, and no inheritance tax is due at all if you live for seven years afterwards. If you die within seven years, the gift is added back into your estate and may be taxable, with taper relief reducing the tax on gifts made three to seven years before death (gov.uk, as at August 2026, subject to change).
Does taper relief reduce the value of a gift?
No. Taper relief reduces the tax charged on a gift, not the value of the gift, and it only applies where gifts made in the seven years before death exceed the nil-rate band of £325,000. It cannot reduce the tax on the estate below that band (gov.uk, as at August 2026, subject to change).