Inheritance Tax Gifting Exemptions: Your Annual Allowances Explained
You can give away thousands of pounds every year completely free of inheritance tax — no seven-year wait required. Most people use only a fraction of their available exemptions. Here is every inheritance tax gifting exemption, how much you can give, and how to combine them for maximum impact.
Note: This article covers the main IHT gifting exemptions as of the 2025/26 tax year. Thresholds and rules can change — always verify with HMRC or a qualified adviser for the latest position.
Gifting Exemptions at a Glance
Annual Exemption: £3,000 per Year
Every individual can give away up to £3,000 per tax year (6 April to 5 April) completely free of inheritance tax. This is the most commonly used exemption and the simplest to apply.
- You can give the full £3,000 to one person or split it between several people
- A married couple can give away £6,000 per year between them (£3,000 each)
- If you did not use last year's exemption, you can carry it forward — but only for one year
- Current year's exemption is always used first, then the brought-forward amount
Peter made no gifts in 2024/25. In 2025/26 he gives £5,000 to his daughter.
| Amount | |
|---|---|
| Gift to daughter | £5,000 |
| Less: 2025/26 annual exemption | −£3,000 |
| Less: 2024/25 carried-forward exemption | −£2,000 |
| Potentially exempt transfer (PET) | £0 |
The entire £5,000 is covered by exemptions. If Peter had also not used his 2023/24 exemption, that would be lost — you can only carry forward one year.
Small Gifts: £250 per Person
You can make gifts of up to £250 to as many individuals as you like in a tax year, completely exempt from IHT. There is no limit on the number of recipients.
However, there are two important rules:
- The gift must be £250 or less — if you give £251, the entire amount fails the exemption (not just the excess)
- You cannot use the small gifts exemption and the annual exemption for the same person in the same tax year
This exemption is particularly useful for birthday and Christmas gifts to grandchildren, nieces, nephews, and friends.
Wedding and Civil Partnership Gifts
When someone gets married or enters a civil partnership, you can make a tax-free gift up to the following limits:
| Relationship to couple | Maximum exempt gift |
|---|---|
| Parent | £5,000 |
| Grandparent or great-grandparent | £2,500 |
| Anyone else (including bride/groom to each other) | £1,000 |
Wedding gift exemptions per person
Both parents can each give £5,000, so a child could receive £10,000 from their parents alone. This is in addition to the annual exemption — so a parent could give their child £8,000 in the year of the wedding (£5,000 wedding + £3,000 annual) completely free of IHT.
The gift must be made on or shortly before the wedding. If the wedding is called off, the exemption does not apply. Gifts made well in advance may not qualify.
Gifts to Charities and Political Parties
Gifts to qualifying charities are completely exempt from IHT with no upper limit, as covered in our complete guide to inheritance tax. This applies to gifts made during your lifetime and to bequests in your will.
If you leave at least 10% of your net estate to charity in your will, the IHT rate on the rest of your estate drops from 40% to 36%. This reduced rate can sometimes mean your beneficiaries receive more even after the charitable donation.
Gifts to UK political parties are also exempt, provided the party has at least two MPs or received at least 150,000 votes at the last general election.
Normal Expenditure from Income
This is arguably the most powerful gifting exemption because it has no upper limit. If you can demonstrate that your gifts are:
- Part of a regular pattern
- Made from income (not capital)
- Do not reduce your standard of living
...then they are immediately exempt from IHT. A retiree with a generous pension could give away tens of thousands per year under this exemption.
We cover this exemption in detail in our dedicated guide: Normal Expenditure from Income: The IHT Exemption Most People Miss.
Combining Exemptions Strategically
The real power of gifting exemptions comes from using them together, consistently, over many years.
Richard and Helen are married, both retired with combined pension income of £90,000. Their living costs are £50,000. They have two adult children and four grandchildren.
| Exemption | Richard | Helen | Annual total |
|---|---|---|---|
| Annual exemption | £3,000 | £3,000 | £6,000 |
| Small gifts (4 grandchildren × £250 each) | £1,000 | £1,000 | £2,000 |
| Normal expenditure from income | £15,000 | £15,000 | £30,000 |
| Total exempt gifts per year | £19,000 | £19,000 | £38,000 |
| Timeframe | Total gifted | IHT saved at 40% |
|---|---|---|
| After 1 year | £38,000 | £15,200 |
| After 5 years | £190,000 | £76,000 |
| After 10 years | £380,000 | £152,000 |
| After 15 years | £570,000 | £228,000 |
Cumulative IHT savings from consistent use of all exemptions
Over 15 years, Richard and Helen could remove £570,000 from their estate using only exempt gifts — saving their family up to £228,000 in inheritance tax. None of these gifts require a seven-year survival period. For gifts that do use the seven-year rule, the savings could be even greater.
Record-Keeping
Good records are essential for your executors to claim the exemptions. Keep:
- A gift log: Date, recipient, amount, and which exemption applies
- Bank statements: Showing the payments leaving your account
- Income and expenditure summary: Annual figures if claiming normal expenditure from income (your executors will need this for HMRC form IHT403)
- Wedding invitations or certificates: If claiming the wedding gift exemption
Without records, your executors may not be able to prove the gifts qualified for exemptions, and HMRC may treat them as potentially exempt transfers subject to the seven-year rule. Your executors will need this information when completing the IHT400 return.
Frequently Asked Questions
How much can I give away each year without paying inheritance tax?
You can give away £3,000 per tax year under the annual exemption, plus unlimited small gifts of up to £250 per person (to different people), plus wedding gifts of up to £5,000 to a child, £2,500 to a grandchild, or £1,000 to anyone else. You can also make gifts from surplus income with no upper limit under the normal expenditure from income exemption.
Can I carry forward unused annual exemption?
Yes, but only for one year. If you did not use your £3,000 annual exemption last tax year, you can carry it forward and use up to £6,000 this year. Any unused exemption from two or more years ago is lost permanently.
Are gifts to my spouse exempt from inheritance tax?
Yes, gifts between spouses or civil partners are completely exempt from IHT with no limit, provided both are UK-domiciled. If your spouse is non-UK domiciled, there is a £325,000 lifetime limit on exempt transfers (which can be increased to the full exemption by electing to be treated as UK-domiciled).
What happens if I give more than the exempt amounts?
Gifts that exceed the exempt amounts become potentially exempt transfers (PETs). If you survive seven years after making the gift, it falls out of your estate completely. If you die within seven years, the gift is added back to your estate for IHT, though taper relief may reduce the tax on gifts made between three and seven years before death.
Can I give my house to my children to avoid inheritance tax?
You can gift your house, but if you continue to live in it, HMRC treats this as a 'gift with reservation of benefit' and it remains in your estate for IHT. To avoid this, you would need to pay a full market rent to the new owner. In practice, gifting a home you still live in rarely achieves the desired IHT saving.
See How Gifting Reduces Your IHT Bill
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