Glossary · UK
What is Small Gifts Exemption?
An Inheritance Tax rule letting you give up to GBP 250 per person each tax year to any number of people, free of IHT.
Full Definition
The small gifts exemption is an Inheritance Tax relief that lets an individual give up to GBP 250 to as many different people as they like in each tax year, with those gifts immediately outside their estate for IHT purposes. The key limit is that the exemption applies per recipient: if a gift to one person exceeds GBP 250 in the year, the whole amount to that person is disqualified from this exemption (it cannot be reduced to GBP 250). You also cannot combine it with the GBP 3,000 annual exemption for the same person -- the small gifts exemption only covers people who have not received part of your annual exemption. It is useful for regular modest gifts to grandchildren, friends or wider family. Because it removes value from the estate, it can reduce the 40% Inheritance Tax charge that applies above the GBP 325,000 nil-rate band, alongside other exemptions and the residence nil-rate band of GBP 175,000.