Key takeaways
- You can give away £3,000 a year free of Inheritance Tax, and carry forward any unused amount for one year.
- Gifts of up to £250 per person per year are exempt, as long as the same person has not had the £3,000 exemption.
- Wedding gifts are exempt up to £5,000 from a parent, £2,500 from a grandparent and £1,000 from anyone else.
- Regular gifts from surplus income that do not reduce your standard of living are exempt without limit.
- Gifts to a spouse, civil partner, charity or political party are usually exempt in full.
Most gifts are only exempt from Inheritance Tax (IHT) if you live for seven years afterwards. But several exemptions take gifts outside IHT straight away, whatever happens. Using them every year is one of the simplest forms of estate planning.
The main exemptions
| Exemption | Limit | Notes |
|---|---|---|
| Annual exemption | £3,000 a year | Unused amount carries forward one year only |
| Small gifts | £250 per recipient per year | Cannot be combined with the annual exemption for the same person |
| Wedding or civil partnership gifts | £5,000 (parent), £2,500 (grandparent or great-grandparent), £1,000 (anyone else) | Must be made on or shortly before the wedding |
| Normal expenditure out of income | Unlimited | Regular, from income, leaving you enough to maintain your standard of living |
| Spouse or civil partner | Unlimited (usually) | Limited to £325,000 if the recipient is not a long-term UK resident, unless an election is made |
| Charities and community amateur sports clubs | Unlimited | Also reduces the rate on the estate to 36% if 10% or more is left to charity |
| Political parties | Unlimited | Qualifying parties only |
| Maintenance of family | Unlimited | Reasonable provision for a spouse, ex-spouse, children in education and dependent relatives |
The £3,000 annual exemption
Each person can give away £3,000 in each tax year without it counting towards their estate. A couple can give £6,000 between them.
If you do not use it all, the unused part can be carried forward to the next tax year only. The current year’s exemption is used first.
Example
Grace gave nothing in 2025/26. In 2026/27 she gives her son £5,000.
| Amount | |
|---|---|
| Gift | £5,000 |
| 2026/27 annual exemption | (£3,000) |
| Brought forward from 2025/26 | (£2,000) |
| Potentially exempt transfer | £0 |
Grace still has £1,000 of 2025/26 exemption unused, but it is lost at the end of 2026/27.
Small gifts of £250
You can give up to £250 to as many different people as you like in a tax year. The exemption cannot be combined with the annual exemption for the same recipient: a gift of £400 to one person is not covered as £250 small gift plus £150 annual exemption, although it can be fully covered by the annual exemption.
Wedding and civil partnership gifts
Gifts made in consideration of a marriage or civil partnership are exempt up to:
- £5,000 from each parent
- £2,500 from each grandparent or great-grandparent
- £1,000 from anyone else
The gift must be made on or shortly before the wedding, and the wedding must go ahead.
Gifts out of surplus income
One of the most valuable exemptions has no fixed limit. Gifts are exempt if they:
- form part of your normal expenditure, meaning a regular pattern, such as monthly payments into a grandchild’s savings or paying life insurance premiums
- are made out of income, not capital
- leave you with enough income to keep your usual standard of living
Keep records: your income, regular spending and gifts each year. Executors claim the exemption on form IHT403, and HMRC will want evidence. This exemption suits people with pensions or investment income well above their needs.
What is not exempt
Gifts that do not fall within an exemption are potentially exempt transfers if made to individuals: they become exempt if you survive seven years, and are added back into your estate if you do not. Gifts into most trusts are chargeable lifetime transfers. See potentially exempt transfers.
Gifts with reservation
A gift is ignored for Inheritance Tax if you keep a benefit from it, such as giving your home to your children but continuing to live there rent-free. The asset stays in your estate. Paying a full market rent can avoid this.
Frequently asked questions
How much can I give away tax-free each year?
£3,000 under the annual exemption, plus £250 to any number of other people, plus wedding gifts and regular gifts out of surplus income.
Can I carry forward the £3,000 annual exemption?
Yes, but only for one tax year. If you gave nothing last year you can give up to £6,000 this year.
Do I need to report gifts to HMRC?
Not when you make them, unless they are chargeable lifetime transfers. Keep records, because your executors will need to report gifts made in the seven years before your death.
Are gifts from income really unlimited?
Yes, if they are regular, made from income rather than capital, and leave you able to maintain your usual standard of living.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance in October 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.