Gifting money to family members is a common and generous way to provide financial support — whether you’re helping children onto the property ladder, supporting grandchildren, or assisting elderly relatives.
The good news is that UK tax law allows you to give away money tax-free, as long as you stay within certain rules and allowances.
This guide explains how much you can gift tax-free, how Inheritance Tax (IHT) applies, and what records you should keep.
What Counts as a Gift for Tax Purposes?
In the UK, a gift includes more than just cash. HMRC treats the following as gifts:
- Cash or bank transfers
- Personal possessions (e.g. jewellery, antiques, furniture)
- Property or land
- Shares and investments
- Assets sold below market value (the discount counts as a gift)
Anything left in your will is not a lifetime gift — it forms part of your estate and may be subject to Inheritance Tax.
Gifts That Are Always Tax-Free
Gifts Between Spouses or Civil Partners
You can give unlimited gifts to your spouse or civil partner tax-free, provided:
- They permanently live in the UK, and
- You are legally married or in a civil partnership
Gifts to Charities and Political Parties
Gifts to registered UK charities or political parties are also fully exempt from Inheritance Tax.
The £3,000 Annual Gifting Allowance
Each tax year, you can gift up to £3,000 tax-free. This is known as the annual exemption.
Key rules:
- You can give £3,000 to one person or split it across several people
- If unused, it can be carried forward for one tax year only
- This means you could gift £6,000 in one year if the previous year’s allowance was unused
The tax year runs from 6 April to 5 April.
Small Gifts Allowance (£250 Rule)
You can also give small gifts of up to £250 per person per tax year, tax-free.
Important conditions:
- You can give these to any number of people
- You cannot combine this with the £3,000 annual exemption for the same person
Wedding and Civil Partnership Gifts
Special tax-free limits apply for wedding or civil partnership gifts:
- £5,000 to a child
- £2,500 to a grandchild or great-grandchild
- £1,000 to anyone else
These gifts must be made on or shortly before the wedding.
Normal Spending Out of Income (Unlimited Allowance)
One of the most powerful — and often misunderstood — exemptions is normal spending out of income.
You can give unlimited tax-free gifts if all of the following apply:
- The gifts come from regular income (not savings)
- They are made regularly
- They do not affect your standard of living
Examples include:
- Monthly support payments to children
- Paying rent for a family member
- Regular contributions to a child’s savings account
- Supporting elderly relatives
Record-keeping is essential. HMRC may ask for evidence that the gifts qualify.
The Seven-Year Rule Explained
Most larger gifts are classed as Potentially Exempt Transfers (PETs).
- If you live for 7 years after making the gift → no Inheritance Tax
- If you die within 7 years, the gift may become taxable
Inheritance Tax Rates on Gifts
- 0–3 years before death: 40%
- 3–7 years before death: Reduced via taper relief
Important:
- Taper relief only applies if total gifts exceed the £325,000 nil-rate band
- Each gift has its own 7-year clock
Do You Need to Report Gifts to HMRC?
In most cases, no reporting is required for everyday gifts.
However, you should keep records if:
- You rely on the normal spending out of income exemption
- You make large gifts
- You are an executor dealing with an estate
- Gifts involve trusts or property
Recipients do not pay income tax on gifts.
Common Gifting Mistakes to Avoid
- Forgetting to keep records
- Assuming all gifts are immediately tax-free
- Gifting property but continuing to live in it rent-free (gift with reservation of benefit)
- Exceeding allowances without understanding IHT implications
- Ignoring how gifts interact with estate planning
