Gifting Money to Children UK (2026): Tax Rules, Limits & How to Do It Safely

There is no single limit — several exemptions can be combined. The key ones in 2026/27 are: (1) Annual exemption: £3,000 per donor per tax year (not per recipient — the total of all gifts in the year). You can carry forward one unused year's exemption (maximum £6,000 if last year was unused). (2) Small gifts exemption: £250 per person per tax year — you can give up to £250 each to as many different people as you like, but the £250 small gift exemption and annual exemption cannot be combined for the same recipient. (3) Normal expenditure out of income: no fixed limit — regular gifts from surplus income (not capital) that do not reduce your standard of living are exempt, provided they form part of a regular pattern. These exemptions apply regardless of how many children you have — each is a per-donor-per-year limit.

Any cash gift above the available exemptions is a Potentially Exempt Transfer (PET). If you survive seven years from the date of the gift, it falls completely outside your estate for inheritance tax purposes. If you die within seven years, the gift is added back into your estate for IHT calculation. Between years three and seven, taper relief reduces the effective IHT rate on the gift: 20% IHT (effectively) after 3–4 years, 16% after 4–5 years, 12% after 5–6 years, 8% after 6–7 years, 0% after 7 years. Taper relief reduces the tax on the gift — not the amount of the gift itself — and only applies where the cumulative PETs exceed the nil-rate band (£325,000). Keep a record of all significant gifts with the date and amount.

Yes — wedding and civil partnership gifts benefit from a specific IHT exemption. The amount depends on your relationship to the recipient: parents can give up to £5,000 to a child on marriage; grandparents and other relatives can give £2,500; any other person can give £1,000. These limits are per donor per marriage, and the gift must be made before or on the date of the wedding (not after). The wedding gift exemption is in addition to the annual exemption, so a parent could give £5,000 as a wedding gift plus the £3,000 annual exemption in the same tax year — £8,000 completely exempt. If the wedding is called off before it takes place, the exemption is lost.

Yes — gifts from surplus income (not from your capital) can be IHT-exempt under the 'normal expenditure out of income' exemption, provided three conditions are met: (1) the gift is part of a regular pattern of giving (e.g. monthly or annual transfers); (2) it is made from income, not capital; (3) after making the gift, the donor is left with sufficient net income to maintain their usual standard of living. There is no fixed amount — it depends on your income and expenditure. Regular payments to help a child with rent, a monthly allowance, or regular school fee contributions can all qualify. HMRC expects contemporaneous records showing the pattern of giving and that it came from income, not capital — keep a spreadsheet or bank statement trail.

Gifts above the nil-rate band (£325,000 in 2026/27) that have been made in the seven years before death will attract IHT on the excess. The gifts are 'grossed up' against the nil-rate band in chronological order (oldest first). Any gift that falls within the nil-rate band uses up that allowance — gifts above the remaining band, or gifts made after the nil-rate band has been exhausted, are taxed at 40% (or reduced rates under taper relief if made 3–7 years before death). The primary liability for IHT on a PET falls on the recipient — the person who received the gift — not the estate, though the estate can also be liable if the recipient cannot pay.

HMRC does not require a formal document for every cash gift, but good record-keeping protects both the donor and the recipient. Best practice is to: (1) keep a written note or spreadsheet of each gift, noting the date, amount, recipient, and which exemption you are relying on; (2) transfer by bank rather than cash — a bank statement trail is contemporaneous evidence; (3) for recurring income gifts, keep annual records showing income, expenditure, and the surplus from which gifts are made (Form IHT403 is used by executors when reporting gifts to HMRC — if you anticipate making large gifts, prepare the records IHT403 will ask for). The executor is required to report all gifts made in the seven years before death on the IHT400, so clear records significantly reduce the risk of HMRC challenges after your death.

Potentially, yes — for the donor. If you give away assets to reduce the value of your estate and you subsequently need means-tested benefits or care home funding, the local authority or DWP can look back at asset disposals and treat deliberately given assets as still owned (known as 'deliberate deprivation of assets'). There is no fixed look-back period — assessors consider whether reducing assets was a significant reason for the gift. For care home means-testing, local councils can look back several years. Gifts made at a time when you had no reasonable expectation of needing care are less likely to be challenged, but gifts made shortly before a care need arises are scrutinised closely.