Last verified: 12 October 2026 • Based on HMRC-published rates 2026/27
How much money can you give someone tax-free in the UK?
You can give away up to £3,000 each tax year under the annual exemption without paying any Inheritance Tax (IHT). You can also make unlimited small gifts up to £250 per person per tax year, wedding gifts up to £5,000 for children (£2,500 for grandchildren, £1,000 for others), and regular gifts from normal surplus income. Gifts larger than £3,000 are Potentially Exempt Transfers (PETs): they become 100% tax-free if you survive for 7 years after making the gift.
UK Tax-Free Gifting Allowances (2026/27)
- Annual Exemption: £3,000 per person per year. Can carry forward 1 unused year (up to £6,000 max).
- Small Gifts Exemption: Up to £250 per person per year to as many people as you wish.
- Wedding / Civil Partnership Gifts: Up to £5,000 to a child, £2,500 to a grandchild, £1,000 to anyone else.
- Spousal Exemption: 100% tax-free gifting between UK-domiciled married spouses or civil partners.
- Regular Gifts from Surplus Income: Unlimited, provided they come from net income and do not reduce your standard of living.
The 7-Year Rule & Taper Relief Explained
If you gift more than £3,000 in a year, it becomes a Potentially Exempt Transfer (PET). If you survive for 7 full years, no Inheritance Tax is payable regardless of amount. If you die within 7 years and your total gifts exceed the £325,000 Nil-Rate Band, sliding taper relief reduces the tax rate:
Inheritance Tax Taper Relief Rates Table
| Time Between Gift and Death | Taper Relief Reduction | Effective Tax Rate Charged | Tax Due on £100k Taxable Gift |
|---|---|---|---|
| Less than 3 years | 0% (Nil) | 40% (Full Rate) | £40,000.00 |
| 3 to 4 years | 20% reduction | 32% | £32,000.00 |
| 4 to 5 years | 40% reduction | 24% | £24,000.00 |
| 5 to 6 years | 60% reduction | 16% | £16,000.00 |
| 6 to 7 years | 80% reduction | 8% | £8,000.00 |
| 7 or more years | 100% exempt | 0% (Tax-Free) | £0.00 (Exempt) |
Calculate Your Total Estate Tax Liability
Model your £325k Nil-Rate Band, £175k Residence Band, and potential taper relief on gifts.
Frequently Asked Questions: Tax-Free Gifting
Can I give £10,000 to my child tax-free?
Yes. There is no tax when making the gift. The first £3,000 is covered by your annual exemption (or £6,000 if carrying forward unused allowance from the prior year). The remaining £4,000 to £7,000 is a Potentially Exempt Transfer (PET) and becomes completely tax-free if you survive 7 years.
Does the recipient pay tax on cash gifts?
No. In the UK, cash gifts are not treated as taxable income. The recipient pays no Income Tax or Capital Gains Tax on cash received. Any tax implications only arise under Inheritance Tax if the donor passes away within 7 years.
What is the annual gifting allowance in 2026/27?
The annual gift exemption is £3,000 per person per tax year. A married couple can give away £6,000 combined each year without any IHT implications.
Can you carry forward unused gift allowance?
Yes, you can carry forward any unused annual exemption for exactly one tax year. If you made no gifts last year, you can give away up to £6,000 tax-free this year.
How does the £250 small gift allowance work?
You can give small gifts of up to £250 per person to as many individuals as you like each tax year (e.g. birthday or Christmas presents), provided you have not used another exemption on the same person.
How much can you give for a wedding tax-free?
Parents can give up to £5,000 to a child getting married; grandparents can give £2,500; and anyone else can give £1,000. These wedding allowances can be combined with the £3,000 annual exemption.
What are gifts from normal expenditure out of income?
Gifts made as part of your normal expenditure out of net income are 100% exempt from IHT immediately. To qualify, they must be regular (e.g. paying school fees or monthly standing orders) and leave you with sufficient income to maintain your usual standard of living.
Who pays the tax if a donor dies within 7 years?
Under UK law, if a lifetime gift exceeds the £325,000 nil-rate band and death occurs within 7 years, the recipient of the gift is primarily liable to pay the taper-relieved Inheritance Tax, unless the donor’s will explicitly directs otherwise.
Do you pay Capital Gains Tax when gifting property or shares?
Yes. Gifting assets other than cash (such as buy-to-let properties, family heirlooms, or shares) is treated as a disposal at market value and may trigger Capital Gains Tax for the donor if the asset has increased in value.
Should I keep records of gifts I make?
Yes. It is vital to keep a written record of gifts, dates, recipients, and amounts. Your executors will need these records to complete HMRC form IHT403 when administering your estate.