Gifting money (or assets) to your family can be a thoughtful way to support loved ones whether for a child’s house deposit, helping ageing parents, or simply passing down some wealth. But in the UK, this needs to be done with care. There is no separate “gift tax”, but your gifts can affect your estate and trigger Inheritance Tax (IHT) if you die within seven years of making them (unless they fall within certain exemptions).
This guide explains how it works, what you can give, what the exemptions are, and what you should watch out for.
What Counts as a Gift?
A gift for these purposes includes:
- Cash transfers or bank payments
- Property or assets (shares, jewellery, artwork) given outright
- Selling something to a family member for less than its market value (the “discount” counts as a gift)
If you give away money or assets and get nothing (or less than the full value) in return, it’s classed as a gift for IHT purposes
Do You Pay Tax Immediately on Gifts?
No: there’s no immediate “gift tax” in the UK. But many gifts are treated as Potentially Exempt Transfers (PETs): they become exempt from IHT only if you live at least seven years after giving them.
If you don’t survive seven years, certain gifts may become taxable depending on the timing and your estate value.
Tax-Free Gift Allowances & Exemptions
Here are the main allowances for 2025/26:
1. Annual Exemption
You can give away up to £3,000 per tax year, which will not count toward IHT. If you don’t use it, you can carry it forward for one year.
2. Small Gift Exemption
You can give as many gifts of up to £250 per person per tax year as you like, provided you haven’t used another exemption for that recipient in that year.
3. Wedding/Civil Partnership Gifts
- Up to £5,000 if given by a parent
- Up to £2,500 if given by a grandparent
- Up to £1,000 if given by someone else And the gift must be made before the marriage/partnership.
4. Regular Gifts Out of Surplus Income
If you make regular gifts out of your income (and it doesn’t affect your standard of living) those may be immediately exempt from IHT. No fixed limit, but you must keep good records.
The 7-Year Rule (and Taper Relief)
If a gift isn’t covered by the exemptions above and you die within seven years of making it, the gift may be added back into your estate for IHT. The key elements:
- If you live 7+ years after giving it, it’s exempt.
- If you die between 0-3 years, tax could be up to 40%.
- Between 3-4, 4-5, 5-6, 6-7 years, taper relief applies: 32 %, 24 %, 16 %, 8 % respectively.
Example
You give £50,000 to your child in 2025.
- If you survive beyond seven years, no IHT on that gift.
- If you die within four years, your estate may pay tax on part of the gift or whole of the gift depending on thresholds.
Also, the gifts count toward your IHT threshold (the £325,000 nil-rate band) if you die within seven years
Can I Gift My House to My Children?
Yes, you can but this area is complex. If you gift your home but continue living in it rent-free, HMRC still counts it as part of your estate (a “gift with reservation of benefit”).
To make it effective for IHT purposes, you’d need to:
- Move out entirely, or
- Pay market rent to your children for living there.
Professional advice is crucial before gifting property.
Record Keeping Matters
Always keep written records of your gifts, including:
- Dates
- Amounts
- Who received them
- The occasion or purpose
This helps your executor calculate IHT accurately if it ever becomes relevant.
Frequently Asked Questions (FAQs)
1. Is there a tax on gifting money to family in the UK?
No immediate gift tax exists. But gifts may be subject to IHT if you die within the seven-year period and the gift falls outside exemptions.
2. How much money can I gift tax-free?
You can give up to £3,000 per tax year under the annual exemption, plus £250 per person in small gifts, plus wedding exemptions, plus regular gifts from income.
3. Do I need to report gifts to HMRC?
Generally no, unless you die within seven years and IHT becomes relevant. Executors may need to report certain gifts with form IHT403.
4. Should I get professional advice before gifting large sums?
Absolutely. Large gifts, property transfers, or continuing to benefit from gifted assets can create unexpected tax liabilities. Planning ahead is key.
5. How do I gift money to avoid Inheritance Tax in the UK?
To minimise IHT, make use of:
- The £3,000 annual exemption
- Small gifts of up to £250 per person
- Wedding gifts within HMRC limits
- Regular gifts out of surplus income, which are immediately exempt And live for at least seven years after making large gifts to ensure they’re fully exempt.
6. Can I give my son £100,000 in the UK?
Yes, you can give your son £100,000 there’s no upper limit. But only £3,000 will be immediately exempt from IHT (plus any unused exemption from the previous year). The remaining amount becomes a Potentially Exempt Transfer and will only be free of IHT if you live for seven years after giving it.
Final Thought
Gifting money to family in the UK can be a tax-efficient and meaningful way to share your wealth, but understanding the HMRC rules ensures your generosity doesn’t create future tax problems.
Whether it’s using your annual allowance, supporting children with wedding costs, or planning long-term wealth transfers, it’s wise to plan your gifts strategically.
Need help planning tax-free gifts or understanding inheritance implications? At Pro Taxman, our tax specialists can guide you through gifting strategies, inheritance planning.