Inheritance Tax Gifts UK (2026): Annual Allowance, All Exemptions & the 7-Year Rule

You can give away £3,000 per tax year (6 April to 5 April) under the annual exemption — this falls outside your estate immediately. Any unused annual exemption carries forward one year only, so you can give up to £6,000 in a single year if you gave nothing the year before. Separately, you can give up to £250 to any number of people each tax year under the small gifts exemption. Wedding gifts are also exempt up to set limits. Larger gifts may be potentially exempt transfers (PETs) — outside the estate only if you survive 7 years.

A potentially exempt transfer (PET) is a gift to an individual that is not covered by one of the automatic exemptions. When you make the gift, it is 'potentially' exempt — it only becomes fully exempt if you survive 7 years from the date of the gift. If you die within 7 years, the gift is brought back into your estate and may be taxed. The PET uses up the nil rate band first; only if the PET exceeds the nil rate band (£325,000) does additional IHT arise, and then taper relief reduces the rate charged for gifts made 3–7 years before death.

Taper relief reduces the rate of inheritance tax on gifts made between 3 and 7 years before death. It applies only when the total of all chargeable gifts in the 7-year period exceeds the nil rate band. The relief works as follows: gifts made 0–3 years before death: 40% (full rate); 3–4 years: 32% (20% reduction); 4–5 years: 24% (40% reduction); 5–6 years: 16% (60% reduction); 6–7 years: 8% (80% reduction); 7+ years: 0% (fully exempt). Taper relief reduces the tax rate, not the value of the gift for NRB purposes.

Gifts made regularly from surplus income are completely exempt from IHT — no limit on amount and no 7-year rule. To qualify, the payments must: (1) be part of your normal expenditure (i.e. a pattern of regular giving, not a one-off); (2) come from income, not capital; (3) leave you with sufficient income to maintain your normal standard of living. Examples include regular monthly payments to a child, paying a grandchild's school fees from your pension income, or regular charitable standing orders. This exemption is powerful but requires careful record-keeping — HMRC will ask for evidence.

Gifts on the occasion of marriage or civil partnership are exempt up to set limits: parents of either party can give up to £5,000 each; grandparents can give up to £2,500 each; anyone else can give up to £1,000. The gift must be made on or before the wedding day (or conditionally on the marriage taking place). The wedding gift allowance can be combined with the annual £3,000 exemption — so a parent could give up to £8,000 tax-free in a year they also use their annual allowance.

Yes — gifts between UK-domiciled spouses and civil partners are completely exempt from IHT, with no limit on amount and no 7-year rule. Gifts to a non-UK-domiciled spouse are exempt up to £325,000 (the nil rate band). There is no restriction on the type of asset — cash, property, investments, and business interests can all be given between spouses without IHT. This exemption applies both during lifetime and on death (spouse exemption for estates).

During your lifetime, you do not need to report gifts to HMRC — there is no gift tax in the UK requiring annual returns. However, when you die, your executors must report all gifts made within 7 years of death on the HMRC IHT return (form IHT400, schedule IHT403). Failure to disclose gifts can lead to penalties. It is therefore sensible to keep a record of significant gifts you make — the date, recipient, value, and which exemption (if any) applies. A letter of wishes to your executors noting significant lifetime gifts can help them complete the IHT return accurately.