IHT Gift Exemptions UK: Every Inheritance Tax Exemption on Gifts Explained (2026)

Each individual may give away £3,000 per tax year free of IHT — the gift is immediately outside the estate with no seven-year clock. If the annual exemption is not fully used in one tax year, the unused balance can be carried forward to the next tax year only (not accumulated further). The carry-forward is used only after the current year's exemption is exhausted. Married couples and civil partners each have their own £3,000 annual exemption — a couple can jointly give £6,000 per year (or £12,000 if both have unused carry-forward from the previous year). The annual exemption applies to the total of all gifts in the tax year — it is not per recipient. If you give £3,000 to one child, the exemption is exhausted for that year for any other gifts. The annual exemption can be combined with other exemptions: for example, a wedding gift exemption can be used alongside the annual exemption on a gift to a child getting married, sheltering more than £3,000 in one transaction.

Up to £250 may be given to any number of individuals in any one tax year without IHT. There is no overall cap on the total: a donor can give £250 each to 100 different people in the same year if they choose. The exemption applies per recipient — not per donor. The key restriction: the small gifts exemption cannot be used to give part of a larger gift to the same person and then apply the exemption to the first £250. If the annual exemption (£3,000) is also used in the same transaction, the small gifts exemption cannot also apply to the same recipient — the two exemptions apply to separate recipients. Small gifts are immediately exempt — no seven-year clock.

Gifts made in consideration of a marriage or civil partnership are exempt from IHT up to specified amounts depending on the relationship between the donor and the recipient. The gift must be made before the marriage or civil partnership takes place (not after) and must be conditional on the ceremony occurring. If the marriage does not take place, the gift is not exempt. The limits apply per donor per marriage event — a parent can give £5,000 to a child on each marriage without IHT. Grandparents can each give £2,500 per grandchild per marriage. The parties to the marriage can each give the other up to £2,500. Wedding gifts to the couple from friends are exempt up to £1,000 each. The wedding gift exemption can be used in addition to the annual exemption in the same tax year — for example, a parent giving £5,000 (wedding exemption) plus their £3,000 annual exemption gives £8,000 immediately exempt in one transaction.

This is the most powerful of the automatic IHT gift exemptions. Gifts made regularly out of surplus income — income that exceeds the donor's normal living expenses — are immediately exempt from IHT with no monetary limit and no seven-year clock, provided three conditions are satisfied: (1) The gifts form part of the donor's normal expenditure — they are habitual and regular, not one-off payments. A single payment does not qualify; a consistent annual or monthly payment does. (2) The gifts are made from income, not capital — the source of the gift must be income (salary, pension, dividends, rental income, interest) rather than accumulated capital. (3) After making the gifts, the donor is left with sufficient income to maintain their usual standard of living. The exemption is most commonly used for: regular annual cash gifts to children or grandchildren; paying life insurance premiums in trust (which then falls outside the estate); contributing to a child or grandchild's savings. Documentation is essential: HMRC requires evidence of the pattern (a record of gifts made each year, the income received, and the living expenses). Many donors write a letter of wishes at the outset explaining the intended gifting pattern. The exemption is uncapped — a retiree with pension income of £80,000 per year and living costs of £30,000 could give away £50,000 per year without IHT under s21.

Certain payments for the maintenance of family members are exempt from IHT without a seven-year clock. Qualifying payments include: (1) Payments for the maintenance, education, or training of a child of the donor (including stepchildren, adopted children, and children of a former marriage) for the period to the end of full-time education; (2) Payments for the maintenance of a former spouse or civil partner after divorce or separation; (3) Payments for the care or maintenance of a dependent relative — a relative of the donor or their spouse who is unable to maintain themselves by reason of old age or infirmity. The amount must be reasonable in all the circumstances. This exemption is narrower than normal expenditure from income — it is specifically about maintaining a dependant, not simply making regular gifts. It is most relevant for: school fees paid directly to a school for a grandchild (maintenance of a child of the donor's child — this is a grey area; HMRC may accept it but the position is not fully settled); care costs for an elderly parent; ongoing maintenance payments after divorce.

Gifts to charities registered with the Charity Commission (England and Wales), OSCR (Scotland), or the Charity Commission for Northern Ireland, or to non-UK charities established in an EU country (for historical gifts) are fully exempt from IHT — both during lifetime and on death. There is no monetary limit. The charity exemption applies to gifts during the donor's lifetime (immediately exempt, no seven-year clock) and to charitable legacies in the will. An additional benefit: where 10% or more of the baseline estate is left to charity in the will, the IHT rate on the chargeable estate drops from 40% to 36% (Schedule 1A IHTA 1984). The charity must be a qualifying charitable body — HMRC has power to check that the recipient qualifies.

Gifts to qualifying political parties are exempt from IHT. A qualifying party is one that at the last general election either: (a) had at least two MPs returned; or (b) had one MP returned and received at least 150,000 votes in total across all constituencies. This covers the main UK parties but excludes smaller parties with no or minimal Parliamentary representation. The exemption applies to lifetime gifts and testamentary legacies alike. There is no monetary limit on the exemption.

PETs are not an automatic exemption — they are conditional. A PET is a lifetime gift to another individual (or certain trusts for disabled persons) that becomes fully exempt if the donor survives the gift by seven years. If the donor dies within three years of the gift, the full 40% rate applies on the value of the gift above the NRB. If the donor dies between three and seven years, taper relief reduces the effective rate: 3–4 years 32%; 4–5 years 24%; 5–6 years 16%; 6–7 years 8%. PETs are the most powerful tool for larger gifts — there is no annual cap. A gift of £500,000 to a child becomes fully exempt after seven years. PETs are commonly used for: large lump-sum gifts of savings or investments; house deposits; lifetime transfers of investment property (though CGT crystallises on the transfer at market value); gifts of business assets (where BPR applies both at the time of the gift — no chargeable transfer — and potentially on the recipient's death if they hold qualifying property for two years).

How much can I give away tax-free each year for inheritance tax?

Each person has a £3,000 annual exemption (s19 IHTA 1984) — immediately outside the estate, no seven-year clock. Plus £250 per recipient (small gifts exemption, s20) to any number of people. Plus wedding gifts if relevant (up to £5,000 for a parent). Plus unlimited gifts from surplus income under the normal expenditure from income exemption (s21). These can all be used in the same year. Larger gifts — PETs — are also immediately recorded but only become exempt if the donor survives seven years.

Can I carry forward my annual IHT gift exemption?

Yes, but only for one year. If you do not use all (or any) of your £3,000 annual exemption in a tax year, the unused portion can be carried forward to the next tax year. However, the current year's exemption must be used before the carried-forward balance. If you still do not use it in the second year, it is lost — you cannot accumulate more than two years' worth. A married couple who have not used either year's exemptions can give away up to £12,000 (£6,000 × 2 with one year of carry-forward) immediately exempt in one tax year.

What is the normal expenditure from income IHT exemption?

Section 21 IHTA 1984 exempts gifts made regularly from surplus income — income above the donor's normal living expenses — with no monetary cap and no seven-year clock. Three conditions must be met: the gifts must be habitual (part of a regular pattern), made from income not capital, and leave the donor with enough income for their usual standard of living. This is the most powerful automatic exemption for retirees with pension income above their needs. Full documentation of the income, expenses, and gifts is essential to support a claim on the estate.

Are wedding gifts exempt from inheritance tax?

Yes, up to the specified limits per relationship: £5,000 from a parent; £2,500 from a grandparent or more remote ancestor; £2,500 from either party to the marriage to each other; £1,000 from any other person. The gift must be made before the wedding in consideration of the marriage taking place. The wedding exemption can be combined with the annual exemption in the same tax year — for example, a parent giving a wedding gift of £5,000 plus £3,000 annual exemption = £8,000 immediately exempt in one gift.

What is the difference between a PET and an exempt gift?

An exempt gift (annual exemption, small gifts, wedding gift, normal expenditure from income, charity) is immediately outside the estate from the moment it is made — no seven-year clock, no IHT even if the donor dies the next day. A potentially exempt transfer (PET) is not immediately exempt — it becomes exempt only if the donor survives seven years. If the donor dies within seven years, the PET is brought back into the IHT calculation. PETs are used for larger gifts where the donor hopes to survive the seven-year period; exempt gifts are used to reduce the estate immediately.