How to Gift Money to Family in the UK Without Paying Tax
- Alex Mason - Investing & Financial Growth Writer
- Apr 11
- 6 min read
Giving money to family is one of the simplest and most heartfelt ways to support your loved ones. Whether it’s to help your child with a house deposit, give a wedding gift, or support a grandchild through university, many people want to transfer wealth during their lifetime.
But in the UK, gift-giving isn’t always tax-free. If not done carefully, your generosity could result in an unexpected Inheritance Tax (IHT) bill for your family down the line.
This guide explains exactly how to gift money to family in the UK without triggering tax implications—covering annual limits, exemptions, timing strategies, and unique insights you won’t find in most guides.
What Counts as a ‘Gift’ for Tax Purposes?
A gift includes anything of value that you give to someone else without receiving full market value in return. This can be:
Cash
Property or land
Jewellery or artwork
Shares or investments
Debt that’s written off
It doesn't matter whether it's a physical item or money—if it reduces the value of your estate, it's classed as a gift.
Why Gifts Can Be Taxable: Understanding Inheritance Tax
The UK doesn’t have a separate gift tax, but gifts can still be taxed under Inheritance Tax (IHT) rules if you die within seven years of making the gift and your estate is worth more than the IHT threshold (currently £325,000).
Gifts made within seven years of death are added back into your estate, which could lead to:
A larger IHT bill for your estate
A potential tax charge for the person receiving the gift
That’s why proper planning is crucial.
Read our guide on: What Is Inheritance Tax and How to Reduce It?
How Much Money Can You Gift Tax-Free?
1. Annual Exemption – £3,000 Per Tax Year
You can give away up to £3,000 each tax year without it being added to your estate for IHT purposes. This is your Annual Exemption.
You can split this between multiple people
If you didn’t use it last year, you can carry it forward one year (total: £6,000 max)
This is one of the simplest and most commonly used exemptions.
2. Small Gifts Exemption – £250 Per Person
You can give up to £250 to as many people as you like each tax year, provided:
They haven’t received any part of your £3,000 Annual Exemption
It’s a one-off or casual gift (e.g. birthday, Christmas)
3. Wedding or Civil Partnership Gifts
The UK allows larger tax-free gifts for weddings or civil partnerships:
£5,000 to a child
£2,500 to a grandchild or great-grandchild
£1,000 to anyone else
You must make the gift before the wedding, and it must go ahead for the exemption to apply.
4. Regular Gifts from Surplus Income
This is an underused but highly valuable exemption. If you have income that exceeds your regular living expenses, you can gift the surplus regularly without any Inheritance Tax consequences.
Key conditions:
Gifts must be made from income, not savings
They must be regular and consistent (e.g. monthly standing order)
They must not affect your usual standard of living
You must keep detailed records of income, expenses, and the gifts to prove the exemption if needed.
The 7-Year Rule: How Timing Affects Gift Tax
If your gift doesn’t qualify for one of the exemptions, it will be considered a Potentially Exempt Transfer (PET). This means:
It becomes completely IHT-free if you survive seven years after making the gift
If you die within seven years, the gift is added to your estate
Taper Relief (If You Die 3–7 Years After the Gift)
If the gift is more than £325,000 and you die within 3 to 7 years, taper relief may reduce the IHT due:
3–4 years: 80% tax payable
4–5 years: 60%
5–6 years: 40%
6–7 years: 20%
Note: Taper relief only reduces the tax due, not the value of the gift added to your estate.
Unique Insight: Use Gifts to Reduce Income-Based Charges
If you’re a high earner or receive child benefit, gifting money can reduce your taxable income, helping you avoid:
The High Income Child Benefit Charge (if your income is over £50,000)
Losing your personal allowance (reduced if you earn over £100,000)
Exposure to higher-rate tax bands
This only works if you make regular gifts from income and no longer benefit from the money. It’s a strategic way to support family while also reducing your own tax burden.
Can You Gift a House or Property?
Yes—but with strict rules. If you gift a property and continue to live in it without paying full market rent, it's still classed as part of your estate. This is called a gift with reservation of benefit.
To make a gift of property completely IHT-free:
You must move out, or
Pay full market rent to the new owner
Also consider Capital Gains Tax (CGT) if you're gifting a property other than your main home.
Should You Use a Deed of Gift?
If you’re gifting significant amounts of money or property, a Deed of Gift is a legal document that proves the gift was made voluntarily, without coercion, and without expectation of repayment. This can:
Provide legal clarity
Prevent disputes later
Support any future HMRC reviews
You don’t need a solicitor for small gifts, but for anything large or complex, legal advice is recommended.
Do You Need to Report Gifts to HMRC?
You don’t usually need to report gifts when they’re made, unless:
You’re claiming they qualify for the “gifts from income” exemption
You’re completing an IHT return following someone’s death
HMRC may investigate large or irregular gifts as part of a deceased person’s estate valuation, so keeping clear records is essential.
Read our guide on: Handling Finances After a Loved One Dies
Mistakes to Avoid When Gifting Money
Gifting from savings and calling it surplus income – HMRC will spot the difference
Failing to document gifts – You need evidence to prove exemptions
Making one large gift and assuming it’s tax-free – It may be added back into your estate if you die within 7 years
Giving away a property but continuing to live in it rent-free – Triggers IHT unless rent is paid
Assuming you don’t need advice – For gifts over £10,000, it’s worth speaking to a financial adviser or estate planner
Read our guide on: Why Everyone Should Write a Will
FAQ: Gifting Money and UK Tax Rules
Can I give £10,000 to my child without paying tax?
Yes, but it may count as a potentially exempt transfer. If you survive 7 years after the gift, it’s tax-free. If not, it could be added to your estate for IHT purposes unless it qualifies for an exemption.
Can I gift money to my grandchildren?
Yes. You can use your £3,000 annual exemption, small gifts allowance, or wedding gift allowance. Gifts over these limits may become subject to IHT if you die within 7 years.
Is there a limit on how much I can gift tax-free in the UK?
There’s no total cap, but only certain amounts are automatically exempt. Larger gifts may be taxed if you die within 7 years.
Do recipients of gifts pay tax?
No. There’s no gift tax in the UK for recipients. If tax is due, it’s usually the responsibility of your estate.
Should I keep a record of gifts?
Yes—especially if they’re over £250 or made regularly from income. Keep a spreadsheet or written log with dates, amounts, and recipients.
Final Thoughts
Gifting money to your family during your lifetime is a wonderful way to help them—whether you’re contributing to a deposit, paying for education, or simply supporting them through a tough time. But to avoid unexpected tax bills, it's essential to understand the rules and plan accordingly.
Start by using your annual exemptions, consider regular gifts from surplus income, and always keep clear records. For significant gifts or property transfers, professional advice can ensure everything is above board and as tax-efficient as possible.
By giving with intention—and awareness—you can maximise the benefit to your family and minimise any tax risk to your estate.
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