Inheritance Tax Gift Rules UK 2026: What You Can Give Tax-Free

Chandraketu Tripathi

Finance Editor, Kaeltripton

Published 4 Apr 2026

Last reviewed 4 May 2026

✓ Fact-checked

By Chandraketu Tripathi | Updated April 2026

Inheritance tax (IHT) in the UK is charged at 40% on estates above the nil-rate band of £325,000. However, there are multiple legitimate ways to reduce your IHT liability through gifts made during your lifetime. Understanding the gift rules — including the £3,000 annual exemption, the 7-year rule, and gifts out of income — can significantly reduce the tax your estate pays on death.

Key Facts

IHT nil-rate band 2026-27: £325,000 (frozen until 2031) | IHT rate: 40% above the threshold | Annual gift exemption: £3,000 per person | Gifts between spouses: unlimited | Charity gifts: exempt

IHT Gift Exemptions: What You Can Give Tax-Free UK 2026

Exemption	Limit	Rules
Annual exemption	£3,000 per tax year	Can carry forward one year if unused — max £6,000
Small gifts exemption	£250 per person, per year	Unlimited number of recipients — cannot combine with annual exemption for same person
Wedding/civil partnership gift — child	£5,000	Must be given before or on the wedding day
Wedding gift — grandchild/great-grandchild	£2,500	Before or on the wedding day
Wedding gift — anyone else	£1,000	Before or on the wedding day
Gifts out of normal income	Unlimited	Must be from regular income, not capital — must leave standard of living unchanged
Gifts to spouse/civil partner	Unlimited	Both must be UK domiciled for full exemption
Gifts to UK charities	Unlimited	Fully exempt — leaving 10%+ to charity also reduces IHT rate to 36%
Gifts to political parties	Unlimited	Party must have 2+ sitting MPs or 150,000+ votes at last general election

The 7-Year Rule and Taper Relief

Source: HMRC. Taper relief only applies where the total gift exceeds the nil-rate band (£325,000). It reduces the tax rate, not the amount of the gift.
Years Between Gift and Death	IHT Rate on Gift	Taper Relief
0–3 years	40%	None
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

Gifts Out of Normal Income: The Underused Exemption

The 'gifts out of normal income' exemption is one of the most powerful and underused IHT planning tools. It allows you to give away unlimited amounts free of IHT — as long as the gifts are: regular (not necessarily annual — but must form a pattern), made from income (not savings or investments), and do not affect your usual standard of living. For example, if you receive a pension of £40,000/year and only need £30,000 to live comfortably, you can give away £10,000/year free of IHT — with no 7-year clock required. HMRC Form IHT403 should be completed to document these gifts.

Potentially Exempt Transfers (PETs): The 7-Year Clock

Any gift made to an individual (not a trust) that is not covered by a specific exemption is called a Potentially Exempt Transfer (PET). PETs become fully exempt if you survive for 7 years after making the gift. If you die within 7 years, the gift is added back to your estate and may trigger IHT (subject to taper relief after 3 years). Key point: taper relief reduces the tax rate on the gift, not the value of the gift itself — so it only benefits the recipient if the gift exceeds the available nil-rate band.

Frequently Asked Questions

How much can I gift tax-free UK 2026?

Each person can give away up to £3,000 per tax year completely free of inheritance tax — this is the annual exemption. If you didn't use your exemption last year, you can carry it forward once, giving £6,000. Additionally, you can give any number of gifts of up to £250 to different individuals with no IHT, make gifts out of regular surplus income tax-free, and give wedding gifts within specific limits.

What is the 7-year rule for gifts and inheritance tax?

Gifts made more than 7 years before you die are completely free of inheritance tax, regardless of amount. Gifts made in the 3 years before death are taxed at the full 40% IHT rate if the estate exceeds the nil-rate band. Between 3 and 7 years, a sliding scale called 'taper relief' applies: 3–4 years = 32%, 4–5 years = 24%, 5–6 years = 16%, 6–7 years = 8%.

Can I give my children money without paying inheritance tax UK?

Yes, through several exemptions: up to £3,000/year under the annual exemption, up to £5,000 as a wedding gift to your child, up to £250 per person per year as a small gift, gifts that are part of your normal expenditure from income, and gifts made more than 7 years before your death (regardless of amount).

What gifts are exempt from inheritance tax UK?

Fully exempt gifts include: gifts between spouses and civil partners (unlimited), gifts to UK-registered charities, gifts to political parties, gifts to qualifying museums and national institutions, the annual £3,000 exemption, small gifts up to £250 per person, wedding/civil partnership gifts (within limits), and gifts out of normal income.

What is a Potentially Exempt Transfer (PET)?

A Potentially Exempt Transfer (PET) is a gift made to an individual (not a trust) that becomes fully exempt from IHT if the donor survives for 7 years after making it. If the donor dies within 7 years, the gift becomes chargeable to IHT — either at the full 40% rate (within 3 years) or at a reduced rate via taper relief (3–7 years). PETs should be documented with dates and values.

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Disclaimer: Tax rates and allowances change annually. Always verify with HMRC or a qualified accountant. Sources: GOV.UK, HMRC, House of Commons Library, DS Burge & Co, Rest Less, Phinch.co.uk, Morningstar UK. April 2026.