How Much Can You Gift Someone Tax Free in the UK?

In the UK, you can give money or assets to others without paying tax – but there are limits. These limits are especially important when it comes to Inheritance Tax (IHT). While many gifts are tax-free, others may be taxed if you die within seven years of making them.

This guide explains how much you can gift tax free, who you can give to without triggering a tax charge, and how gifts are treated for IHT purposes.

How Much Can I Give to My Spouse or Civil Partner Tax-Free?

You can give unlimited gifts to your spouse or civil partner during your lifetime without incurring any tax, provided they are UK-domiciled. This exemption does not apply to unmarried partners.

If your spouse is not UK-domiciled, there may be limits on how much you can gift before IHT becomes a concern, so specialist advice is recommended in those cases.

How Much Can I Give to My Children and Family Tax-Free?

If you are giving to your children, grandchildren or other relatives, the following tax-free allowances may apply:

Annual Gift Allowance

You can give up to £3,000 each tax year free from Inheritance Tax. This is known as your annual exemption. You can split the £3,000 between several people if you wish.

If you didn’t use last year’s allowance, you can carry it forward one year, allowing a potential total gift of £6,000 tax-free.

Small Gifts

You can give up to £250 per person, per tax year, to as many individuals as you like, as long as they haven’t already received part of your £3,000 allowance.

Wedding or Civil Partnership Gifts

You can give tax-free gifts for weddings or civil partnerships, depending on your relationship to the couple:

• Up to £5,000 to a child

• Up to £2,500 to a grandchild or great-grandchild

• Up to £1,000 to anyone else

These gifts must be made before the ceremony takes place and are only exempt if the marriage goes ahead.

Gifting to a Charity in Your Will

Gifts to UK-registered charities, either during your lifetime or in your will, are exempt from Inheritance Tax.

If you leave at least 10% of your estate to charity, the IHT rate on the rest of your estate may be reduced from 40% to 36%.

What Else Can I Give Tax-Free?

You can also make regular gifts from income that do not affect your standard of living. These can be tax-free if they are part of your normal expenditure and paid from surplus income, not capital. Examples include:

• Paying into a grandchild’s savings plan

• Contributing to a child’s rent or school fees

• Making regular payments to support a dependent

You should keep detailed records of these gifts to prove that they meet HMRC's criteria.

What Is a Potentially Exempt Transfer (PET)?

If you gift someone a sum of money or asset that exceeds your tax-free allowances, it becomes a Potentially Exempt Transfer. No tax is payable at the time of the gift, but if you die within seven years, the gift may become subject to IHT.

If you survive for seven years after making the gift, it becomes fully exempt.

Taper Relief

If you die between three and seven years after making a PET, taper relief may reduce the amount of tax payable:

• Less than 3 years: 40%

• 3–4 years: 32%

• 4–5 years: 24%

• 5–6 years: 16%

• 6–7 years: 8%

• 7+ years: 0%

Taper relief only applies to the tax due, not the value of the gift.

Are There Any Reliefs from Inheritance Tax?

Yes, in addition to gift allowances, there are other IHT reliefs:

• Business Relief – For gifts of qualifying business assets

• Agricultural Relief – For farmland and qualifying agricultural property

• Charity Relief – For gifts to registered charities

These reliefs can be used in combination with lifetime gifts and gifting via a will.

Inheritance Tax on Pensions

Most pensions are outside of the estate for IHT purposes, particularly defined contribution pensions. This means you can pass your pension to a nominated beneficiary tax-free if you die before 75. After 75, withdrawals are taxed at the recipient’s marginal income tax rate.

Is There Income Tax to Pay on Gifts Received?

In general, there is no income tax to pay when you receive a gift in the UK. However, if a gift generates income – for example, a rental property – you may pay income tax on the money it produces.

Also, if you give a gift that continues to benefit you (such as giving away your house but still living in it rent-free), it may not qualify as a genuine gift for IHT purposes.

Final Thoughts

In the UK, you can give up to £3,000 a year tax-free, with additional allowances for weddings, small gifts, and gifts to spouses or charities. Larger gifts may be subject to Inheritance Tax if you die within seven years, but proper planning, record-keeping and use of exemptions can help reduce or eliminate the tax bill.

If you're considering making substantial gifts, it's wise to seek advice from a solicitor or financial adviser who specialises in estate planning. Done correctly, gifting is one of the most effective ways to pass on wealth without unnecessary tax.