Keeping Records of Gifts for IHT: What HMRC Requires
Every gift made in the 7 years before death must be declared on the IHT400. Without records, your executor faces a guessing game — and HMRC can hold them personally liable for any underpayment.
What to Record for Each Gift
Date of gift
Exact date — determines annual exemption year and 7-year taper
Amount / value
Cash amount, or market value of asset at date of gift
Recipient
Full name and relationship (child, grandchild, friend)
Nature
Cash, property, investment, rent-free use, school fees
Exemption claimed
Annual (£3k), small gifts (£250), marriage, income
Supporting evidence
Bank statement, transfer receipt, solicitor letter
Frequently Asked Questions
Why do I need to keep records of gifts made during my lifetime?
When you die, your executor must complete IHT400 Schedule IHT403 (Gifts and other transfers of value), which requires details of all gifts made in the 7 years before death. The executor must report: (1) Each gift's date, value, and description; (2) The recipient's name; (3) Any IHT exemptions used (annual exemption, marriage exemption, gifts out of income); (4) Whether any conditions applied. Without your records, the executor must try to reconstruct 7 years of gifting from bank statements, memory, and conversations with family — an unreliable and stressful process. If gifts are understated or omitted and HMRC discovers them, the executor can be personally liable for the additional IHT, interest, and penalties. HMRC has 6 years from the IHT charge to enquire, and 20 years in cases of fraud or careless omission.
What information should I record for each gift?
For each gift, keep a record of: (1) Date of gift — the exact date matters for the 7-year taper relief calculation and the annual exemption year; (2) Amount or value — for cash gifts, the amount transferred; for property or assets, the market value at date of gift; (3) Recipient — full name and relationship to you; (4) Nature of the gift — cash, asset, or benefit (e.g. rent-free use of property); (5) Purpose — birthday/Christmas gift, wedding gift, contribution to house purchase, school fees, etc.; (6) Exemption claimed — annual exemption (£3,000 per year), small gifts exemption (£250 per person), normal expenditure out of income exemption, marriage/civil partnership exemption; (7) Any conditions attached to the gift; (8) If a CLT (gift to trust): details of the trust, the amount, and any IHT paid at the time. Store all supporting documentation: bank statements, transfer records, solicitor correspondence for property gifts.
How long should I keep gift records?
Keep records of gifts for at least 7 years from the date of each gift — this covers the full PET (potentially exempt transfer) window within which a gift can become chargeable to IHT if you die. For gifts where IHT was paid at the time (chargeable lifetime transfers, CLTs), keep records for at least 6 years from the date of the IHT assessment — HMRC's standard enquiry window — or 20 years if there is any risk of fraud allegations. In practice: keep all gift records from the date you make the gift until the end of the estate administration after your death. Your executor will need the records to complete IHT400. Consider keeping records indefinitely if the estate is likely to be subject to IHT, as HMRC challenges can arise years after the grant of probate.
How do I document gifts out of normal income (the regular gifts exemption)?
The normal expenditure out of income exemption (s21 IHTA 1984) allows gifts that form part of a regular pattern of giving from after-tax income to be exempt from IHT — with no annual limit. However, claiming this exemption requires strong documentary evidence because HMRC scrutinises it closely. Keep: (1) Bank statements or payment records showing the pattern of giving — the regularity must be demonstrated, not just claimed; (2) Records of your annual income from all sources: employment, pension, investment income, rental income; (3) Records of your normal annual expenditure (household bills, living costs, holidays) to show there was surplus income available for gifts; (4) Evidence that the giving was habitual — not a one-off; (5) A written schedule prepared each year recording: income received, normal expenditure, surplus, and gifts made from that surplus. The HMRC form IHT403 has a table for this purpose. Without adequate records, the exemption will be denied and the gifts become chargeable PETs.
What happens if my executor cannot trace all the gifts I made?
If your executor cannot identify gifts made in the 7 years before your death, several problems arise: (1) Understatement of the estate — if PETs that failed (because you died within 7 years) are not declared, IHT is underpaid. HMRC can raise a corrective assessment; (2) Executor personal liability — if the executor distributes the estate without paying the correct IHT, they become personally liable for the shortfall; (3) HMRC enquiry — if HMRC identifies undeclared gifts through bank records, Land Registry, or third-party information (e.g. a recipient mentions a gift), HMRC may open a formal enquiry. Practically: the executor will contact banks for up to 7 years' statements; review correspondence; and ask family members about gifts they received. This is time-consuming and incomplete. The solution is to keep your own gift log, updated each year, and store it with your will.
Store Your Gift Log With Your Will
A simple gift log kept with your will makes your executor’s job straightforward and protects against HMRC challenges. The WillSafe kit from £19.97 for England and Wales.