IHT Gift Exemptions UK 2026: Annual Exemption £3,000, Small Gifts £250, Wedding Gifts, Normal Expenditure from Income, and All Seven Immediately Exempt Categories
Seven categories of gift are IMMEDIATELY exempt from IHT — no 7-year clock; no PET. The normal expenditure from income exemption alone can remove tens of thousands per year from the estate. Are you using all of them?
The Normal Income Exemption (s21 IHTA) Is Unlimited — Most People Miss It
If you have surplus income (pension, rental, investment income) after paying living costs: any amount given regularly from that surplus is IMMEDIATELY IHT-exempt. No cap. No 7yr wait. A retired person with £50k surplus income gifting £40k/yr by standing order removes £400k from the estate over 10 years — saving £160k IHT. Set up a standing order and document the income/expenditure position now.
| Exemption | Amount / Conditions | Immediately Exempt? | Planning Action |
|---|---|---|---|
| Annual exemption (s19 IHTA 1984) | £3,000 per donor per tax year (6 April to 5 April). Can be split across any number of recipients in any proportions. Carry-forward: if the FULL £3,000 was unused in the previous tax year, the unused amount carries forward to the NEXT year only. Maximum with carry-forward: £6,000 (previous year's £3,000 unused + current year's £3,000). Rule: the CURRENT YEAR's allowance is used FIRST; only after exhausting the current year's £3,000 is the carried-forward amount used. Example: year 1 — give nothing (£3,000 available; zero used); year 2 — give £6,000 (uses current year £3,000 + carried-forward £3,000 = £6,000 fully exempt). Year 3: back to £3,000 (no carry-forward available as year 2 was fully used). | YES — immediately exempt. No PET. No 7yr clock. No taper relief. Regardless of when the donor dies. | USE IT EVERY YEAR. The annual exemption is the most reliable and simple IHT planning tool. If you give £3,000 every year for 10yr: £30,000 immediately outside the estate (saving £12,000 IHT at 40%). Couple: EACH has £3,000/yr — combined £6,000/yr immediately exempt (£12,000 with carry-forward if neither used last year). Never miss a year — the carry-forward is only ONE year (unused year 1 allowance expires if not used in year 2). |
| Small gifts exemption (s20 IHTA 1984) | Up to £250 per recipient per tax year. No limit on the NUMBER of recipients — you can give £250 to any number of different people. CANNOT be combined with the annual exemption for the same recipient: if you give someone £3,000 under the annual exemption, you cannot also give them £250 under the small gifts exemption in the same year. If you give £200 to a person: the small gifts exemption covers it entirely — you do NOT need to use the annual exemption. If you give £251 to a person: the £1 excess is NOT covered by the small gifts exemption (it is either covered by the annual exemption or is a PET). | YES — immediately exempt for amounts up to £250 per recipient per year. No PET. No 7yr clock. | Practical use: birthday and Christmas cash gifts; grandchildren's pocket money; small annual gifts to many family members. If you have 10 grandchildren: £250 × 10 = £2,500/yr in small gifts exempt — in addition to the £3,000 annual exemption (which can be used for other recipients). Document small gifts — HMRC may question larger numbers of 'small gifts' that look like they were structured to avoid the annual exemption limits. |
| Wedding / Civil Partnership gift exemption (s22 IHTA 1984) | A gift must be made IN CONTEMPLATION of a specific wedding or civil partnership (conditional on the marriage/CP taking place). Limits: parent of either party: £5,000; grandparent (or remoter ancestor) of either party: £2,500; party to the marriage/CP themselves (gift from one to the other): £2,500; any other person: £1,000. The gift can be in cash, investments, property, or other assets. Timing: the gift must be made on or before the wedding/CP date. A gift made after the wedding does NOT qualify for the s22 exemption (it may still be a PET or use the annual exemption). Condition: if the wedding does not go ahead: the exemption fails; the gift is a PET from the date of the gift (7yr clock starts then). | YES — immediately exempt if the conditions are met (the wedding/CP takes place and the gift was made in contemplation). No PET. No 7yr clock. | Useful for large family events: parents of the bride and groom can each give up to £5,000 (£10k combined); if each parent is a couple themselves: up to £20k combined immediately exempt from a wedding gift. Document the gift (reference the wedding specifically; give before or on the date). Financial products gifted before the wedding: e.g., cash gift in a card given at the ceremony is acceptable; a bank transfer the week before labelled 'wedding gift' is acceptable. |
| Normal expenditure from income (s21 IHTA 1984) | UNLIMITED — no monetary cap. This is the most powerful IHT exemption for people with surplus income. Conditions: (1) the gifts must be HABITUAL — made regularly (same approximate amount, same frequency — monthly, quarterly, or annual); (2) made from INCOME — pension income, salary, rental income, investment income, dividends; NOT from capital or asset sales; (3) the donor must have SUFFICIENT INCOME remaining after the gifts to maintain their normal standard of living (not using capital to supplement income for living costs). HMRC will assess the exemption on the donor's death — HMRC Form IHT403 allows executors to document the gifts and claim the exemption posthumously. The evidence: bank statements showing regular transfers; the donor's income and expenditure summary (income > expenditure + gifts). | YES — immediately exempt from IHT. No PET. No 7yr clock. No limit on the total amount. The exemption can cover large annual sums (£20,000/yr or more) if the donor genuinely has that level of surplus income. | The key planning steps: (1) DOCUMENT NOW — prepare an income and expenditure statement showing: total annual income (all sources); total normal annual spending; surplus income; amount being gifted regularly. Keep this updated annually. (2) SET UP A STANDING ORDER — a regular bank transfer (monthly, quarterly, or annual) on the same date makes the 'habitual' test easy to evidence. (3) DECLARE THE PURPOSE — letter of wishes noting the regular gifts and the intent to maintain them supports the executor's claim. (4) Typical candidates: retired professionals with generous DB pensions; landlords with significant rental income; individuals with large investment income from ISAs or portfolios. A retired GP with a £80k pa NHS pension and £30k pa living costs has £50k/yr surplus — potentially £50k/yr immediately exempt under s21 IHTA. |
| Maintenance of family members (s11 IHTA 1984) | Payments for the maintenance, education, or training of: (a) children (inc. step-children, illegitimate children, adopted children) who are under 18 OR in full-time education; (b) a dependent relative (a spouse or civil partner of the donor's child or step-child, or any relative who is unable to maintain themselves because of old age or infirmity — not a standard adult relative); (c) a former spouse or CP of the donor under a court order, maintenance agreement, or other arrangement. These are NOT transfers of value — they are completely outside the IHT regime, not even PETs. | YES — these payments are not transfers of value for IHT at all. No limit on the amount. No 7yr clock. No annual cap. | School fees and university costs: paying a child's school fees or university maintenance costs is immediately IHT-exempt under s11 IHTA — no PET; no 7yr clock. This is an important exemption for grandparents funding grandchildren's education. GRANDCHILDREN: s11 covers grandchildren only if they are the child of the donor's child (not directly applicable to the grandparent-grandchild relationship unless the intermediary child is treated as a dependent relative — specialist advice needed). More reliable for grandparents: use the annual exemption (£3,000) or normal income exemption (s21) for education funding. Dependent relative: payments to a physically or mentally incapacitated relative or elderly relative — immediately exempt under s11. |
| Gifts to charities, political parties, and national institutions | s23 IHTA 1984 — QUALIFYING CHARITIES: gifts to UK-registered charities (and HMRC-recognised non-UK charities — EU/Norway/Iceland based) are fully exempt from IHT. No limit. Lifetime or on death. Not PETs — immediately exempt. s23A IHTA — COMMUNITY AMATEUR SPORTS CLUBS (CASCs): gifts to CASCs from 6 April 2014 — fully exempt. s24 IHTA — QUALIFYING POLITICAL PARTIES: parties that won ≥2 seats at the last general election (or 1 seat plus 150,000 votes) — fully exempt. s25 IHTA and Sch 3 IHTA — NATIONAL PURPOSES: gifts to UK national museums, galleries, universities, and other listed institutions — fully exempt. | YES — all immediately exempt. No 7yr clock. No PET. No limit. | Charitable gifts strategy: use s23 lifetime gifts to reduce the estate during life (no IHT and potential Gift Aid income tax relief). In the will: a charitable residuary legacy at 10% of the baseline estate (s36 IHTA) reduces the rest of the estate's IHT rate from 40% to 36% (s36 IHTA — formula clause). The combination of: annual exemption + normal income exemption + charitable gifts + PETs is the complete suite of lifetime IHT tools. Use them all together for the most effective estate reduction. |
IHT gift exemptions UK 2026. s19 IHTA 1984: annual exemption — £3,000; carry-forward of unused amount from previous tax year only (s19(2)); current year used first; frozen since 1981 (FA 1981 s92). s20 IHTA 1984: small gifts — up to £250 per recipient per year; no limit on number of recipients; cannot be combined with s19 for same recipient in same year; cannot be combined with s20 for one recipient to give £500 (cap is £250 per recipient regardless of combination). s22 IHTA 1984: wedding/civil partnership gifts; amounts: s22(1)(a) £5,000 parent; s22(1)(b) £2,500 grandparent/remoter ancestor; s22(1)(c) £2,500 party to the marriage/CP (mutual gift); s22(1)(d) £1,000 any other person; conditional on the marriage/CP taking place; gift must be made in contemplation of the specific ceremony; timing: on or before the day of the ceremony. s21 IHTA 1984: normal income expenditure — s21(1): not a transfer of value if it satisfies: (a) it is made as part of the normal expenditure of the transferor; (b) taking one year with another, it was made out of income; (c) it leaves sufficient income to maintain the usual standard of living. HMRC IHTM14231-14248: guidance on s21 exemption; HMRC requires evidence from executors; Form IHT403 Gifts and other transfers of value; Schedule IHT403: list of gifts with dates and amounts. Habitual test: Rose v HMRC [2016] (First-tier Tribunal) — a pattern of annual gifts over several years; evidence of income and expenditure; income: all sources including pensions (state and private), rental income, dividends, interest, employment income; NOT capital receipts (matured bond, annuity capital element, asset sale proceeds). Standard of living test: the donor must have enough income AFTER the gifts to meet normal living costs without capital depletion; evidence: bank statements; investment account statements. HMRC challenge: if the donor was running down capital (suggesting income was insufficient), s21 is challenged. Surplus income calculation: total annual income minus total annual expenditure (inc. taxes, housing costs, utilities, food, transport, leisure) = surplus available for gifting. s11 IHTA 1984: dispositions for maintenance of family — excluded from charge to IHT; s11(3): 'allowable' maintenance — money or money's worth provided by a transferor for the maintenance, education, or training of a child of the transferor or of their spouse/CP, or of an illegitimate child of the transferor, if the child has not yet attained the age of 18, or is full-time in education or training. Grandchildren: not directly covered by s11(3) unless they are the child of a dependent child — indirect; safer to use s19/s21. Ex-spouse maintenance: s11(1)(b) — dispositions to provide for the maintenance of a former spouse/CP under a court order or maintenance agreement. s23 IHTA: charity exemption (see iht-gift-to-charity-iht-uk for detail). s24 IHTA: political parties — requires: at least 2 members elected to House of Commons at the last preceding general election; or at least 1 member AND more than 150,000 votes. s25 IHTA and Sch 3: national purposes — institutions listed including: National Gallery; British Museum; National Portrait Gallery; Natural History Museum; Science Museum; National Library (British Library); Victoria and Albert Museum; Tate Gallery; National Maritime Museum; national museums of Scotland/Wales/Ulster; universities; national parks; other heritage bodies. Cumulative lifetime exemption: the annual, small gifts, and wedding gift exemptions can be combined and used simultaneously. Example: £3,000 annual + £250 × 10 grandchildren (£2,500 in small gifts) + £5,000 wedding gift to one child = £10,500 immediately exempt in one tax year (from one donor). PET (s3A IHTA 1984): gifts to individuals in excess of these exempt amounts become PETs — 7yr clock; taper relief from year 3 (see iht-taper-relief-gifts-uk for detail).
Frequently Asked Questions
How much can you give away tax-free before inheritance tax in the UK?
Several categories of gifts are immediately exempt from IHT (no 7-year clock): (1) Annual exemption (s19 IHTA): £3,000 per donor per tax year; unused allowance from the previous year carries forward (maximum £6,000 with carry-forward). (2) Small gifts (s20 IHTA): up to £250 per recipient per year — to any number of people (cannot be combined with the annual exemption for the same person). (3) Wedding gifts (s22 IHTA): up to £5,000 from parents; £2,500 from grandparents; £1,000 from others — given before or on the wedding date. (4) Normal expenditure from income (s21 IHTA): UNLIMITED — any amount given regularly from surplus income (not capital) is immediately exempt, with no cap. (5) Maintenance of family (s11 IHTA): children's school fees; maintenance of former spouse. (6) Charitable gifts (s23 IHTA): unlimited. Beyond these exemptions, gifts to individuals are Potentially Exempt Transfers (PETs — s3A IHTA) — outside the estate after 7 years, tapered from year 3.
What is the IHT annual exemption and can it be carried forward?
The annual exemption (s19 IHTA 1984): £3,000 per donor per tax year (6 April to 5 April). You can give this to one person or split it across multiple recipients. Carry-forward: if the FULL £3,000 was not used in the previous tax year, the unused amount carries forward to the NEXT year only (not beyond). Maximum with carry-forward: £6,000 (if the previous year's £3,000 was completely unused). RULE: the current year's £3,000 is always used FIRST — the carried-forward amount is used only after the current year's allowance is exhausted. A couple (married or not): each has £3,000/yr — combined £6,000/yr (£12,000 with both carry-forwards). The annual exemption has been frozen at £3,000 since 1981. It is immediately exempt — no PET; no 7-year clock; the gift is outside the estate regardless of when the donor dies.
What is the normal expenditure from income exemption for IHT?
The normal expenditure from income exemption (s21 IHTA 1984) is the most powerful IHT gift exemption — with no monetary limit. It applies when: (1) HABITUAL: the gifts are regular (same approximate amount, same frequency — monthly, quarterly, or annual); (2) FROM INCOME: paid from pension income, salary, rental income, dividends, or interest — NOT from capital or asset sales; (3) STANDARD OF LIVING MAINTAINED: after the gifts, the donor still has enough income to cover their normal living costs without using capital. If all three conditions are met: the gifts are immediately exempt from IHT — no limit; no 7-year clock; no PET. Example: a retired person with £80,000 pa pension income and £30,000 pa expenses has £50,000 surplus income. If they gift £40,000 pa by standing order to their children: each gift is immediately IHT-exempt under s21. £40,000 × 10yr = £400,000 removed from the estate — saving £160,000 IHT at 40%. Executors claim the exemption on HMRC Form IHT403; evidence: bank statements showing regular transfers and the donor's income/expenditure summary.
How much can grandparents give as a wedding gift for IHT?
Under the wedding gift exemption (s22 IHTA 1984): a grandparent (or remoter ancestor) can give up to £2,500 to a grandchild as a wedding or civil partnership gift — immediately exempt from IHT (no 7-year clock; no PET). The gift must be made ON OR BEFORE the wedding date and in contemplation of that specific wedding. If the wedding does not proceed: the exemption fails and the gift becomes a PET from the date it was made (7yr clock starts). Parents can give up to £5,000 per child. Any other person (friends, other relatives) can give up to £1,000. These limits apply per DONOR: if both of the child's grandparents (one couple) each give £2,500 = £5,000 from that grandparent couple. Additionally: grandparents can also use their annual exemption (£3,000 each) in the same year as the wedding gift — these are separate exemptions.
What is the small gifts exemption for inheritance tax?
The small gifts exemption (s20 IHTA 1984): gifts of up to £250 per recipient per tax year are immediately exempt from IHT — to any number of different recipients. There is no limit on the total number of recipients. You can give £250 to 50 different people in a year (£12,500 total — all immediately exempt). Restriction: the small gifts exemption CANNOT be combined with the annual exemption for the SAME recipient in the same year. If you give someone £3,000 under the annual exemption: you cannot also give them £250 under the small gifts exemption (you have already exhausted the annual exemption for that person). If a gift exceeds £250 to one person: the small gifts exemption does not apply to ANY of that gift — the full amount must be covered by the annual exemption or is a PET. Practical use: birthday and Christmas gifts to grandchildren, nieces, nephews, and friends — all immediately exempt as long as each gift is ≤ £250. No PET; no 7yr clock.
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