How Much Can You Gift Tax-Free in the UK? (2026/27 Guide)

Gifting money to family and friends is one of the most popular ways to reduce an inheritance tax bill — but it is not as simple as handing over cash and forgetting about it. Whether you want to help a child onto the property ladder, pass money to grandchildren, or just reduce what HMRC will eventually take from your estate, you need to understand the rules first.

This guide explains how much you can gift tax-free each year, what happens to larger gifts, and how to use the UK gifting rules as part of a wider inheritance tax planning strategy.

How Much Can You Gift Tax-Free Each Year?

In the UK, you can give away a total of £3,000 per tax year completely free of inheritance tax. This is called your annual exemption. If you did not use your allowance in the previous tax year, you can carry it forward — but only for one year. That means the maximum you can gift under this exemption in a single year is £6,000.

Beyond the annual exemption, there are several other allowances that let you give money away without it affecting your inheritance tax position:

You can combine different exemptions, but you cannot stack them on the same gift to the same person in the same year. For example, you can give someone £3,000 under your annual exemption and also give £250 to a different person under the small gifts exemption — but you cannot give one person £3,250 using both allowances together.

Do You Pay Tax on Gifted Money in the UK?

In most cases, the person receiving a gift does not pay tax on it. There is no gift tax in the UK in the way that exists in some other countries. However, the person making the gift — or more precisely, their estate — may face inheritance tax consequences.

Whether a gift is taxable depends on:

• How much you give
• Who you give it to
• Whether you survive seven years after making the gift
• Whether the gift falls within one of the exemptions listed above

The key principle is this: gifts that fall outside the annual exemptions are called Potentially Exempt Transfers (PETs). They become fully exempt from inheritance tax only if you live for seven years after making them. If you die within seven years, the gift may be brought back into your estate and taxed — though taper relief can reduce the tax due if you survive at least three years.

What Is a Potentially Exempt Transfer (PET)?

A Potentially Exempt Transfer is any gift to another individual that exceeds your available exemptions. At the time of giving, no tax is due. The gift only becomes chargeable if you die within seven years.

Taper Relief on Gifts

If you die between three and seven years after making a gift, taper relief reduces the inheritance tax rate applied to that gift:

Taper relief only applies to the tax on the gift — not to the amount of the gift itself. And it only kicks in once the gift exceeds your nil rate band (currently £325,000).

How Much Can You Give to Someone Tax-Free?

The amount you can give any individual without any inheritance tax risk depends on which exemption applies:

• Up to £3,000 total per year (annual exemption) — can go to one person or split across several
• Up to £250 per person per year under the small gifts exemption — unlimited number of recipients, but none can also receive part of your annual exemption
• Up to £5,000 to a child getting married or entering a civil partnership
• Up to £2,500 to a grandchild or great-grandchild on their wedding day
• Up to £1,000 to anyone else on their wedding day
• Any amount from surplus income, provided it is regular and does not affect your standard of living
• Any amount to your spouse or civil partner, if they are UK-domiciled

For gifts above these amounts, the seven-year rule applies. The gift is not immediately taxable, but it remains in your estate for seven years from the date of the gift.

Gifting Money From Income: The Normal Expenditure Rule

One of the most valuable and underused gifting strategies is the normal expenditure from income exemption. Unlike the annual exemption, there is no fixed limit on this allowance.

To qualify, the gift must:

• Come from your regular income (not savings or capital)
• Be part of a habitual pattern of giving — not a one-off
• Leave you with enough income to maintain your normal standard of living

This rule is particularly valuable for retirees with reliable income from pensions, investment portfolios, or rental properties. HMRC will scrutinise these claims closely, so it is important to keep clear records.

How to Avoid Inheritance Tax Through Gifting

Gifting is one of several legitimate strategies for reducing inheritance tax. Used correctly, it can significantly reduce — or even eliminate — an IHT bill.

1. Start gifting early

The seven-year clock only starts when you make the gift. The earlier you begin, the more time you have for gifts to fall outside your estate. Waiting until you are seriously ill is unlikely to help.

2. Use every annual exemption

Many people forget to use their £3,000 annual exemption each year. Over a decade, that is £30,000 removed from your estate with zero tax risk. Remember you can carry forward one year's unused allowance.

3. Give from income, not capital

Using the normal expenditure from income exemption means gifts leave your estate immediately, without any seven-year waiting period. If you have surplus income you do not need, this is one of the most tax-efficient ways to give.

4. Use wedding exemptions

Wedding gifts are often overlooked. If you have children or grandchildren getting married, you can give tax-free gifts on top of your annual exemption — without affecting it.

5. Consider a trust

Gifting money into a trust can remove it from your estate, though there may be immediate tax consequences depending on the amount and type of trust. This is a complex area and specialist advice is strongly recommended.

6. Keep good records

HMRC can ask your estate to account for gifts made in the seven years before your death. Keep a written record of the date, amount, and recipient of every significant gift. This makes the process far simpler for your executors.

How to Avoid Inheritance Tax on Property

Property is one of the most common reasons people face an inheritance tax bill. The nil rate band (£325,000) and the residence nil rate band (£175,000) provide up to £500,000 of IHT-free allowance per person — or £1 million for a married couple passing their home to direct descendants. But many estates exceed these thresholds.

Options for reducing IHT on property include:

• Gifting the property during your lifetime and surviving seven years
• Downsizing and using the proceeds to fund exempt gifts
• Placing the property into a trust (complex — seek specialist advice)
• Equity release to reduce the estate value
• Making a will that maximises use of both spouses' nil rate bands

How to Avoid Inheritance Tax on Pensions

Since April 2027, unused pension funds will be included in your estate for inheritance tax purposes — a significant change from the previous rules, where pensions sat entirely outside the estate. However, pensions still offer important planning opportunities:

• Spend other assets first and preserve pension funds, which may be passed on more tax-efficiently than other wealth
• Nominate beneficiaries on your pension — nomination forms keep the pension outside your estate for probate, even if IHT applies
• Consider how your overall estate is structured in light of the new pension rules

This is a fast-moving area of tax law. Anyone with a significant pension fund should review their position with a specialist financial adviser.

Frequently Asked Questions

Do I pay tax on money gifted to me in the UK?

No. The recipient of a gift does not pay tax on it in the UK. There is no gift tax here. The potential tax liability rests with the estate of the person who made the gift, if they die within seven years.

Can I give my children £20,000?

Yes. You can give your children any amount you choose. The first £3,000 (or £6,000 if you have unused allowance from the previous year) is covered by your annual exemption. The remainder is a Potentially Exempt Transfer, which is free of inheritance tax if you survive seven years from the date of the gift.

Does gifting money reduce inheritance tax?

Yes, in most cases. Gifts that fall within annual exemptions reduce your estate immediately. Larger gifts (PETs) reduce your estate after seven years. Gifts from surplus income are also immediately outside your estate under the normal expenditure from income exemption.

What is the 7-year rule for gifts and inheritance tax?

If you make a gift that exceeds your available exemptions and then die within seven years, the gift may be added back to your estate and taxed. If you survive seven years from the date of the gift, it falls completely outside your estate. Taper relief reduces the rate of tax for deaths between three and seven years after the gift.

Can I give away cash to avoid inheritance tax?

Yes, within the rules. You can give cash up to your annual exemption (£3,000 per year) immediately outside your estate. Larger cash gifts are PETs and become exempt after seven years. Regular cash payments from income may also qualify under the normal expenditure from income exemption.

Is there a limit on how much you can give to charity?

No. Gifts to registered UK charities are completely exempt from inheritance tax with no upper limit. If your will leaves at least 10% of your net estate to charity, the IHT rate on the rest of your estate also reduces from 40% to 36%.

Summary: Key Gifting Rules for 2026/27

Gifting is not a one-size-fits-all solution. The right strategy depends on your estate size, income, family situation, and how long you realistically expect to be able to manage larger transfers. For most people, a combination of annual exemptions, income gifting, and longer-term planning will produce the best result.

If your estate is likely to face an inheritance tax bill, getting proper advice early gives you the most options — and the most time for gifts to fall outside your estate.