Small Gifts Exemption Inheritance Tax UK: The £250 Per Person Annual Rule (2026)
Under s20 IHTA 1984, you can give up to £250 per person per tax year to as many people as you like — completely free of IHT, with no 7-year clock and no paperwork. No limit on how many recipients. The catch: you cannot combine it with the annual exemption for the same recipient in the same year. Used alongside the annual exemption and normal expenditure from income, it is a simple, powerful part of any gifting strategy.
| Exemption | Limit | Recipients | Carry-Forward? | 7-Year Clock? |
|---|---|---|---|---|
| Small gifts (s20 IHTA) | £250 per recipient/yr | Unlimited | No | No |
| Annual exemption (s19 IHTA) | £3,000 per donor/yr | 1 or more (split allowed) | Yes — 1yr (max £6k yr 1) | No |
| Normal expenditure from income (s21 IHTA) | Uncapped | Any | N/A (regular pattern required) | No |
| Wedding gift to child (s22 IHTA) | £5,000 per marriage | Child's wedding | No | No |
| Wedding gift to grandchild/party (s22) | £2,500 per marriage | Grandchild's wedding | No | No |
| Wedding gift — others (s22 IHTA) | £1,000 per marriage | Any person's wedding | No | No |
| PET (s3A IHTA 1984) | Uncapped | Individuals only | N/A | Yes — IHT-free after 7yr |
All figures 2026/27. Small gifts (s20) and annual exemption (s19) cannot be combined for the same recipient in the same tax year. Wedding gift exemptions (s22) can be combined with other exemptions for different purposes.
Small Gifts Exemption: Complete Guide
What is the small gifts exemption and how does it work?
The small gifts exemption (s20 IHTA 1984) allows you to give up to £250 per person per tax year completely free of IHT. Key rules: (1) Amount: up to £250 per recipient per tax year — the limit is per individual donor and per individual recipient; (2) No upper limit on recipients: you can give £250 to an unlimited number of people in the same tax year — 100 different grandchildren, cousins, friends, neighbours; (3) Immediately IHT-free: the small gift does not need to survive any 7-year clock. It is outside the estate from the moment it is given; (4) No carry-forward: unlike the annual exemption, the small gifts exemption cannot be carried forward if unused in a prior tax year; (5) Cash or any asset: the exemption applies to gifts of cash, premium bonds, vouchers, or any other asset worth £250 or less. The tax year for this purpose is 6 April to 5 April — so if you make a small gift on 10 April, the next £250 for the same recipient is available from 6 April the following year.
The crucial restriction: cannot combine with the annual exemption for the same person
The most important rule of the small gifts exemption is that it cannot be combined with the annual exemption (s19 IHTA 1984 — £3,000/yr) for the same recipient in the same tax year. The exemptions are mutually exclusive for any given donor-recipient pair: if you give someone £3,000 using the annual exemption in a tax year, you cannot then give them a further £250 under the small gifts exemption in the same year. But: you can give £3,000 (annual exemption) to your daughter, AND give £250 (small gifts exemption) to each of 20 other friends and relatives — the restriction only applies to the same donor-recipient pairing. In practice: use the annual exemption for larger gifts to the recipients who matter most (children, grandchildren), and use the small gifts exemption for smaller gifts to other people — the two exemptions work perfectly together across different recipients.
Practical uses: grandparents with many grandchildren, Christmas and birthday gifts
The small gifts exemption is particularly useful for grandparents with many grandchildren, or for those who want to give small cash gifts to friends and relatives without any IHT paperwork or 7-year tracking. Examples: (1) Grandparent with 10 grandchildren: give £250 to each (£2,500 total) using the small gifts exemption — all immediately IHT-free; (2) Christmas gifts of cash: £250 per person is a comfortable Christmas gift amount — covered by the exemption; (3) Birthday gifts: if kept to £250 or below, birthday gifts are covered — no 7-year clock, no record required; (4) Husband and wife both give: both spouses have separate small gifts exemptions — a couple can each give £250 to the same person, making the effective couple exemption £500 per recipient; (5) Premium bonds: giving £250 in Premium Bonds is a common use of the small gifts exemption — no income tax, no IHT, and the child's NS&I account builds up winnings. The key benefit over larger PETs: there is no administrative burden and no need to record the gifts for the IHT403 return.
Comparing the exemptions: small gifts, annual exemption, and normal expenditure from income
The IHT gifting exemptions work best together, each applied to the right situation: (1) Small gifts exemption (s20 IHTA 1984): £250 per recipient per year, unlimited recipients, no carry-forward, cannot combine with annual exemption for the same recipient — best for many small gifts to different people; (2) Annual exemption (s19 IHTA 1984): £3,000 per year per donor, plus up to £3,000 carry-forward from the prior year (total £6,000 in year 1 with carry-forward), can be split across multiple recipients — best for the largest gift(s) to the most important recipients (typically children); (3) Normal expenditure from income (s21 IHTA 1984): uncapped, no 7-year clock, must be from regular income (not capital), must be habitual (regular pattern of giving), and must leave enough income to maintain the normal standard of living — best for high-earners with surplus income who want to gift regularly without limit; (4) PETs (s3A IHTA 1984): any amount, to any individual, IHT-free if the donor survives 7 years — best for large one-off gifts (property, investments, lump sums) where the donor is healthy and willing to start the 7-year clock. In a well-structured gifting plan: use s21 (normal expenditure) for the maximum regular gifts; use the annual exemption (£3,000) for the main recipients; use small gifts (£250) for wider family and friends.
Wedding and civil partnership gifts — a separate, higher exemption
Wedding gifts (or gifts on the occasion of a civil partnership) are exempt from IHT under a separate provision — s22 IHTA 1984. The limits are higher than the small gifts exemption: (1) A parent giving to their own child: up to £5,000; (2) A grandparent, or a party to the civil partnership who is not a parent, giving: up to £2,500; (3) Any other person giving to either party: up to £1,000. Key requirements: (a) The gift must be made in consideration of the marriage or civil partnership — i.e., around the time of the wedding, and connected to it; (b) The marriage or civil partnership must actually take place — if the wedding is called off, the exemption is lost (subject to any refund of the gift); (c) The gift can be in cash, property, or other assets. The s22 wedding gift exemption is entirely separate from both the small gifts exemption and the annual exemption — it can be combined. A parent can give: £5,000 (wedding gift exemption) + £3,000 (annual exemption) + £250 (small gifts exemption to a different person) in the same tax year. Or, if the parent wishes to give the wedding couple both the wedding gift and uses the annual exemption: £5,000 (s22) + £3,000 (s19 annual) = £8,000 completely IHT-free to their child.
Frequently Asked Questions
What is the small gifts exemption for inheritance tax?
The small gifts exemption (s20 IHTA 1984) allows you to give up to £250 per person per tax year to any number of people, completely free of IHT. There is no 7-year clock — the gift is immediately outside the estate. There is no limit on how many people you can give £250 to. You cannot combine the small gifts exemption with the annual exemption (s19 IHTA — £3,000/yr) for the same person in the same tax year.
Can I give more than £250 under the small gifts exemption?
No — the small gifts exemption is capped at £250 per recipient per tax year. If you give more than £250 to any one person, the entire gift (not just the excess) falls outside the small gifts exemption and must be covered by another exemption (annual exemption, normal expenditure from income) or treated as a PET with a 7-year clock. The limit is strict: £251 disqualifies the whole gift from the small gifts exemption.
Can my spouse and I both use the small gifts exemption for the same person?
Yes — each spouse or civil partner has their own separate small gifts exemption of £250 per recipient per year. A couple can each give £250 to the same grandchild, making the total £500 for that grandchild — entirely IHT-free. Each donor's exemption is independent.
What is the difference between the small gifts exemption and the annual exemption?
Annual exemption (s19 IHTA 1984): £3,000 per donor per year; can be split across any number of recipients; unused amount carries forward to the following year (one year carry-forward only — max £6,000 in year 1). Small gifts exemption (s20 IHTA 1984): £250 per recipient per year; unlimited recipients; no carry-forward; cannot be combined with the annual exemption for the same recipient in the same tax year. The two exemptions work together: use the annual exemption for larger gifts to specific people, and use the small gifts exemption for smaller gifts to others.
Are Christmas and birthday gifts exempt from inheritance tax?
Gifts of £250 or less to any one person per tax year are covered by the small gifts exemption (s20 IHTA 1984) — IHT-free with no 7-year clock. Larger gifts may be covered by the annual exemption (s19 — £3,000/yr) or treated as PETs. Normal birthday and Christmas gifts from income that form part of a regular pattern of giving from surplus income may also be covered by the normal expenditure from income exemption (s21 IHTA 1984). HMRC will not challenge gifts that are clearly normal outgoings from income.
Small Gifts Are Part of a Bigger Strategy — Start With Your Will
Gifting £250 per person is a useful part of any IHT reduction plan — but it works best alongside a well-structured will that claims the RNRB, charitable legacy planning, and lifetime gifting from the annual exemption and surplus income. WillSafe will kits for England and Wales provide the legal foundation.
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