How much can you give before inheritance tax bites? UK gift rules in 2026

Inheritance tax is the most asked-about tax we deal with, and the gift rules are the most misunderstood part of it. The good news is the headline numbers are actually simple. The complication is in the corners.

This post covers the lifetime gift allowances that sit alongside the £325,000 nil-rate band, what the seven-year rule really means, and the few traps that catch people out. All figures verified against gov.uk and current at the date shown above.

The annual gift exemption: £3,000 a year

You can give away £3,000 of value in any tax year (6 April to 5 April) and HMRC treats it as already outside your estate the moment the gift is made. No seven-year wait. No paperwork.

If you do not use it in one year, you can carry it forward by one year only. So a person who has used none of their annual exemption in the prior year can give £6,000 in the current year and have it count fully exempt. Use it or lose it after that.

A couple can combine, so two people can give £6,000 a year, or £12,000 if both have carried forward.

Small gifts: £250 per recipient, unlimited recipients

On top of the £3,000 annual exemption, you can give up to £250 to as many different people as you like in the same tax year, and none of it counts towards your estate. The catch: you cannot stack it with the annual exemption to the same person. If you give one person £3,250, the whole £3,250 has to come out of the annual exemption.

For grandparents with a long birthday list, this is one of the most underused exemptions on the books.

Wedding gifts

Special allowance for gifts made in consideration of a marriage or civil partnership:

• £5,000 to your child
• £2,500 to your grandchild or great-grandchild
• £2,500 to one party of the couple from the other (before the wedding)
• £1,000 to anyone else

Gifts out of surplus income

This is the exemption with the biggest upside and the most paperwork. If you can show that a gift was made out of your income (not your capital) and that it did not affect your normal standard of living, it falls outside IHT completely. Immediately. No seven-year wait, no cap.

The HMRC form is IHT403. Executors fill it in after you die, and they have to evidence the income, the spending pattern and the regularity of the gifts. So if you want to use this exemption, keep clear records year by year while you are alive. Without records the exemption is hard to defend; with records, it works very well.

The seven-year rule, in practice

Larger gifts that do not fit any exemption above are called Potentially Exempt Transfers (PETs). If you survive seven years from the date of the gift, they fall fully outside your estate. If you die inside seven years, the gift is added back to the estate and tax may be due.

Two things people get wrong about this. First, the rate of tax on PETs that fall into charge is tapered after three years (a discount on the tax, not on the gift), so a gift made six years before death attracts only 8 per cent IHT, not the full 40 per cent. Second, the gift uses up your nil-rate band before any of your remaining estate does, so a £325,000 gift in year one leaves nothing for the rest of the estate to claim against if you die inside seven years.

The 2026 thresholds, on the same page

Worth restating because the frozen bands plus property inflation are why this is now a working-family conversation, not a wealthy-family one.

• Nil-rate band: £325,000 per person (frozen until April 2031)
• Residence nil-rate band: £175,000 per person where a home passes to direct descendants
• Couple combined maximum: up to £1,000,000 with full transferable allowances
• RNRB taper: estates over £2,000,000 lose £1 of RNRB for every £2 over
• IHT rate above the bands: 40 per cent (36 per cent if 10 per cent or more of the estate goes to charity)

Three honest opinions

Most families who think they have an IHT problem do. Most who think they do not are closer than they realise.

Lifetime gifting is the most powerful tool here and it is also the one people start too late. The conversation is worth having a decade before you think you need it.

Trusts get pitched a lot. They have a place, but they are not the default answer. We look at the will, the annual gifting plan and the RNRB first; trusts only come in where they add something the simpler tools cannot.

Can I give my house to my children to avoid inheritance tax?

Not as simply as people think. If you keep living in it rent-free, HMRC treats it as a gift with reservation and the house stays in your estate for IHT. If you pay full market rent, it works, but the rent is taxable income for your children. There are routes through this, but the off-the-shelf 'give the house away' plan usually does not survive contact with the rules.

Does the seven-year clock reset if I give the same person more gifts?

No. Each gift has its own seven-year clock from the date of that specific gift. Earlier gifts can still be inside their own seven-year window when a later one is made.

Do gifts to charity reduce inheritance tax?

Yes. Charity gifts during life and in your will are fully exempt from IHT. If you leave at least 10 per cent of your net estate to charity, the IHT rate on the rest of the estate drops from 40 per cent to 36 per cent.