The Gift Allowances Most Families Never Use
Fewer than one in five families take full advantage of the gift exemptions available to them — and the result is thousands of pounds in unnecessary inheritance tax every year.
Here is what you can give away tax-free right now:
Annual exemption: £3,000 per person per year (£6,000 for a couple). If you missed last year, you can carry forward one year — so up to £12,000 for a couple this year.
Small gifts: £250 to any number of different people — grandchildren, nieces, nephews, friends — with no cap on recipients.
Wedding gifts: Parents can give £5,000, grandparents £2,500, anyone else £1,000 — on top of the annual exemption.
Normal expenditure out of income: The most powerful exemption. If gifts are regular, made from income, and do not reduce your standard of living, there is no upper limit. School fees, monthly savings for grandchildren, insurance premiums — all can qualify.
The seven-year rule: Gifts above the exemptions become potentially exempt transfers. Survive seven years and they leave your estate completely. Taper relief reduces the tax if you die between three and seven years after the gift.
The trap: Give something away but keep benefiting from it (like living rent-free in a gifted property) and HMRC treats it as still yours.
What to do now: Check whether you used last year’s £3,000 allowance. Review regular payments that might qualify as normal expenditure. Start a simple record — date, amount, recipient, exemption used. Every pound removed from your estate is a pound that avoids 40% tax.