How Much Money Can You Gift to a Family Member Tax-Free UK?

Last Updated on: 5th September 2025, 12:01 pm

Have you ever wondered if there’s a limit to the amount of money you can gift to your family members without facing tax consequences in the UK? Whether you’re helping a child buy their first home, contributing to a wedding, or simply giving during the festive season, understanding the UK’s tax rules on gifting is essential.

While giving away money might seem straightforward, failing to follow the tax regulations could lead to unexpected bills later down the line. Thankfully, the UK government offers various exemptions and allowances that let you support your loved ones while minimising or avoiding Inheritance Tax.

This guide will help you understand how much money you can gift tax-free, how different exemptions work, and what happens if you exceed those limits. By the end, you’ll be equipped with the knowledge to gift responsibly and legally, without giving more than you need, to HMRC.

What Counts as a Gift Under UK Tax Rules?

Understanding what constitutes a gift is the first step in managing your finances wisely. In the UK, not all gifts are treated equally when it comes to tax. A gift isn’t limited to cash alone. It includes anything of value that reduces your overall estate.

Types of gifts considered under UK tax rules include:

• Cash or money transfers to family or friends
• Personal belongings such as jewellery, antiques, or furniture
• Property and land that you give away
• Stocks and shares listed on the London Stock Exchange
• Unlisted shares, provided they were held for less than two years before your death
• Sales made at undervalue, where you sell something for less than its actual market worth

It’s important to note that if you leave something in your will, it doesn’t count as a gift, it becomes part of your estate, and your estate may be liable for Inheritance Tax. Certain gifts are automatically exempt from Inheritance Tax.

For example, gifts made to:

• Your spouse or civil partner, provided they live permanently in the UK
• Charities or political parties

If you give something away but still benefit from it, like living in a house you’ve transferred to your child, it may be considered a “gift with reservation”, and it could still be taxed as part of your estate.

Understanding these definitions ensures that your financial planning aligns with HMRC guidelines and avoids unnecessary tax issues later on.

How Much Can You Gift Without Paying Tax in the UK?

Navigating the tax-free gifting limits in the UK can feel overwhelming, but once you understand the framework, it becomes easier to use the available exemptions to your advantage.

What is the Annual Exemption and How Does It Work?

Each tax year, you’re allowed to give away a certain amount without it being added to the value of your estate for Inheritance Tax. This is known as the annual exemption and currently stands at £3,000.

You can give:

• £3,000 to one person
• Or divide the £3,000 between several people

For example, you might give £1,000 to each of your three children. These gifts won’t count towards your estate, even if you die within seven years of making them.

Can unused exemptions be carried forward?

If you didn’t use your £3,000 annual exemption last year, you can carry it forward, but only for one tax year. This means you could potentially gift £6,000 in a single year without tax consequences, assuming the exemption wasn’t used the previous year.

To put it simply, here’s how it works:

The tax year runs from 6 April to 5 April the following year.

Being strategic with your annual exemption lets you support your loved ones while remaining within HMRC’s tax-free thresholds. Make sure you track what you give and keep records, as they’ll be useful for estate planning purposes.

What Is the Small Gift Allowance?

Beyond the annual exemption, you can also take advantage of the small gift allowance, ideal for occasions like birthdays, holidays, or general goodwill gestures.

This allowance allows you to give up to £250 to as many individuals as you like per tax year, provided that you haven’t used another exemption for the same recipient in that tax year.

How Many People Can You Gift £250 to Each Year?

There’s no set limit on the number of recipients. You can give £250 to 10, 20, or even 100 individuals, and none of these gifts will be added to your estate for Inheritance Tax purposes. Just make sure you don’t combine the small gift allowance with other exemptions (like the £3,000 annual exemption) for the same person.

Can You Combine This With Other Allowances?

Yes, but only if each exemption applies to a different recipient. You can combine the small gift allowance for one person and the annual exemption for another, but not for the same individual.

Let’s see a comparison for clarity:

Small gifts are especially useful for extended families or community gifting without complex tax implications. Just remember: small amounts can add up, and it’s always wise to keep a record of gifts made, including dates and values.

Are Wedding and Civil Partnership Gifts Tax-Free?

Yes, the UK tax system offers specific allowances for gifts made on the occasion of a wedding or civil partnership, and these are in addition to the annual exemption.

The tax-free gift limits depend on your relationship to the person getting married:

• Up to £5,000 if the recipient is your child
• Up to £2,500 for a grandchild or great-grandchild
• Up to £1,000 for any other individual

You can combine the wedding gift exemption with your annual exemption, but not with the small gift allowance, for the same recipient. So, for example, you could give your daughter £8,000 tax-free in one tax year (£5,000 wedding gift + £3,000 annual exemption).

Wedding gift allowances must be made on or shortly before the date of the wedding or civil partnership to qualify for the exemption. Keeping records is key to ensuring these gifts are treated properly for tax purposes.

Gifting around life milestones is a great way to transfer wealth, but knowing your limits keeps it legally safe and tax-efficient.

What Is the 7-Year Rule for Gifts?

The 7-year rule is a cornerstone of Inheritance Tax planning in the UK. It applies to larger gifts that exceed your annual and special exemptions.

If you give someone a gift and then live for at least seven more years, it becomes entirely free from Inheritance Tax, regardless of the amount.

However, if you die within seven years, tax may apply, but the amount depends on how long you lived after giving the gift.

The taper relief structure is as follows:

• 0–3 years: 40% tax
• 3–4 years: 32%
• 4–5 years: 24%
• 5–6 years: 16%
• 6–7 years: 8%
• 7+ years: 0%

This taper relief only applies if the total value of gifts exceeds £325,000 in the seven years before your death. Otherwise, no tax applies.

The 7-year rule encourages early gifting and rewards proactive estate planning. Keeping accurate records of gifts given and the dates is crucial in applying these rules correctly.

Can You Make Regular Tax-Free Payments?

Yes, another powerful option for tax-free giving is the ‘normal expenditure out of income’ rule. This allows you to make regular payments to someone from your surplus income, without them being added to your estate.

This exemption is unlimited, as long as:

• The payments are made regularly (monthly, quarterly, annually)
• They come from your normal income
• They do not affect your standard of living

Examples of tax-free regular payments include:

• Paying your child’s rent
• Contributing to your grandchild’s savings account
• Supporting an elderly parent with medical costs
• Providing monthly allowances for living expenses

You can also combine this allowance with the annual exemption, but not with the small gift exemption for the same individual.

To qualify, you must document that these payments are part of your routine expenses and are affordable without impacting your lifestyle. Bank statements, income reports, and written explanations can support this.

If managed well, this exemption becomes a long-term, tax-free way of passing wealth to loved ones while you’re still alive.

What Happens If You Gift Property but Still Live in It?

Gifting your home to a family member while continuing to live in it can result in a ‘gift with reservation of benefit’, which means HMRC still counts it as part of your estate when you die.

However, there are ways to structure this kind of gift without tax consequences, provided you:

• Pay full market rent to the new owner
• Live in the property for at least 7 years
• Do not continue benefiting from it without payment

If you only gift part of your property and the new owner also lives in the home, then you may not need to pay rent, and the property may not count as a gift with reservation.

Example scenarios:

• Gift with reservation: You gift your house to your child but continue to live there rent-free, the house remains part of your taxable estate.
• No reservation: You gift your house, move out completely, and live elsewhere for 7+ years, it’s a fully exempt gift.

Property gifting can be complex. Always consider legal and financial advice before making such a move. Otherwise, your good intentions might result in unexpected tax bills for your family.

Do You Need to Report Gifts to HMRC?

In general, you do not need to report gifts to HMRC as long as they fall within the annual, small gift, or regular payment exemptions. However, executors must report gifts made within 7 years of the deceased’s death for Inheritance Tax assessment.

You should keep records of:

• Who received the gift
• What was given and its value
• The date the gift was made

This documentation becomes crucial if Inheritance Tax applies later.

There are specific cases where reporting is recommended:

• Gifts over £3,000 in any tax year
• Multiple large gifts in a short time
• Gifts involving trusts or property

If HMRC challenges a gift and you don’t have proper records, it could be taxed unnecessarily. Being proactive with records ensures peace of mind for you and your family, even if you’re confident no tax will be due.

What Are the Inheritance Tax Implications of Gifting?

Gifting can reduce the size of your taxable estate, but if not managed properly, it can also trigger Inheritance Tax liabilities, especially if large gifts are made shortly before death.

Here’s how gifting impacts your estate:

• Gifts within 7 years of death are added back into the estate
• If the combined value of gifts exceeds £325,000, tax may apply
• The estate usually pays the tax, unless gifts alone exceed the threshold

If this happens, the recipient of the gift may be responsible for paying the Inheritance Tax, especially if the estate cannot cover it.

Key considerations include:

• Gifting earlier gives you more time to survive 7 years and avoid tax
• Using exemptions wisely can significantly reduce taxable estate value
• Taper relief helps if you die within 3–7 years of giving the gift

Overall, strategic gifting is one of the most effective tools for Inheritance Tax planning. But failing to plan means potentially burdening your heirs with large tax bills.

Who Is Exempt from Paying Inheritance Tax on Gifts?

Certain recipients and gift types are completely exempt from Inheritance Tax, regardless of the amount or timing.

These include gifts to:

• Your spouse or civil partner, provided they live in the UK permanently
• Charities registered in the UK
• Political parties that meet specific criteria

Gifts between married partners or civil partners are unlimited and always tax-free, both during life and upon death.

Additionally, gifts for maintenance of dependent relatives, like elderly parents or minor children, may also be exempt if they qualify as necessary living expenses.

Taking advantage of these exemptions means you can support loved ones or causes close to your heart without worrying about Inheritance Tax implications. Using all available allowances ensures your money goes where you intend, not towards unnecessary taxes.

Conclusion

Gifting to your family members can be a meaningful way to support their futures and reduce your estate’s value for Inheritance Tax purposes.

Understanding the UK’s specific rules, including the annual exemption, small gift allowance, wedding exemptions, and the 7-year rule, ensures your generosity doesn’t lead to an unexpected tax burden.

With careful planning, consistent record-keeping, and by making use of every available exemption, you can pass on more of your wealth to the people you care about. Remember that tax rules change, so staying updated and seeking professional advice when needed is always a wise decision.

FAQs

Can I give my children money without paying tax?

Yes, you can give up to £3,000 per year tax-free, and additional allowances may also apply if you meet specific conditions.

How does the seven-year rule work for multiple gifts?

Each gift has its own seven-year countdown, and taper relief may apply to gifts made three to seven years before death.

Can I gift my house and still live in it?

You can, but you must pay full market rent and meet certain conditions to avoid Inheritance Tax.

Are gifts to grandchildren taxed differently than those to children?

Most exemptions apply similarly, but wedding gift allowances differ, £2,500 for grandchildren and £5,000 for children.

Do I have to report gifts to HMRC?

Not usually, but it’s wise to keep records and report large or unusual gifts, especially if within seven years of death.

Can I give birthday and Christmas money tax-free?

Yes, these can fall under the small gift or normal income exemption if they meet HMRC’s conditions.

What records should I keep when giving gifts?

Document who received the gift, the amount, and the date, this helps if your estate is assessed later for tax.