There is an Inheritance Tax exemption that works immediately, with no seven-year wait and no cap: gifts made from normal expenditure out of income. To qualify, a gift must come from income (not capital), be regular or habitual, and leave you able to maintain your usual standard of living.
Common examples include paying a grandchild’s school fees each term, funding life assurance premiums, or giving an adult child a set monthly sum. HMRC will scrutinise this closely after death using form IHT403, so keeping annual records of income, spending and gifts is essential. The exemption is often lost not because the gifts were wrong, but because nobody kept the evidence.
With the nil-rate band frozen at £325,000, this overlooked relief can remove substantial sums from an estate over time, provided it is documented properly from the start.