Answers · UK 2025/26
Do I have to pay Inheritance Tax on gifts in the UK?
Most gifts are tax-free if you live 7 years after making them ("7-year rule"). Gifts within 7 years before death use up your £325,000 nil-rate band first; gifts exceeding the band may attract IHT with taper relief reducing rates after 3 years.
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UK Inheritance Tax (IHT) rules on lifetime gifts. The 7-year rule: gifts made more than 7 years before your death are completely IHT-free. Gifts within 7 years are "Potentially Exempt Transfers" (PETs) — they use up your £325,000 nil-rate band on death; gifts above this attract IHT, but taper relief applies on the excess: 80% IHT for gifts 3–4 years before death, 60% (4–5y), 40% (5–6y), 20% (6–7y), 0% (>7y). Annual exemptions (always tax-free, no 7-year rule): £3,000/year (can carry forward 1 year), wedding gifts (£5,000 to your child, £2,500 to grandchild, £1,000 others), £250 per recipient, normal expenditure from income (regular gifts that don't affect your standard of living), and any gift to a spouse/civil partner or charity. Gifts with reservation of benefit: if you give something away but keep using it (e.g. gift your house but live there rent-free), it remains in your estate. From April 2027 the government plans to bring most pensions within IHT, ending a major planning route.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.