Wondering how much money you can give your family in the UK tax-free in 2025? You might worry that when you gift money to family members, it could trigger unexpected tax bills, but the rules are far more generous than you might think. UK gift tax rules, linked to inheritance tax, allow families to provide financial support while respecting tax laws.
Understanding these rules makes it easier to make the most of allowances and exceptions. That’s why we’ve created this guide at Remitly to break down how much you can give without incurring additional taxes in 2025, including annual allowances and gift exemptions. Read on for tips and practical steps for gifting money legally and tax-efficiently.
Understanding UK gift tax rules and inheritance tax
In the UK, there is no separate gift tax. You’re free to give money or assets to family and friends without triggering tax at the time. The catch is that these gifts may later fall under Inheritance Tax (IHT) if the giver dies within seven years.
These gifts are known as Potentially Exempt Transfers (PETs). If you live seven years after giving, the gift is fully tax-free. But if you die within that period, the HMRC adds the value of the gift back into your estate when calculating IHT.
For example, if you give your child £50,000 in 2024 and live until 2031, the gift is free from IHT. But passing away within that period means that the HMRC will tax the £50,000 gift as part of your estate.
You also need to understand the difference between a lifetime gift and an inheritance. A lifetime gift is a gift that is given when someone is still alive, while inheritance tax refers to assets received after their death. The two overlap only when the seven-year rule comes into play.
The exact tax rate depends on how long you lived after giving your gift:
- 0-3 years: Full inheritance tax applies (40%)
- 3-4 years: 32%
- 4-5 years: 24%
- 5-6 years: 16%
- 6-7 years: 8%
- 7+ years: No tax
This sliding scale, called taper relief, reduces the amount of tax due and not the value of the gift included in the estate.
Annual gift allowances and exemptions
The UK tax system allows you to gift some money and assets each year without taxes:
The £3,000 annual exemption
Each tax year, you can give away up to £3,000 without worrying about IHT. If you don’t use the full annual allowance in one year, you can carry it forward to the next tax year only.
Let’s say you give £1,000 in the 2023/24 tax year, you could carry forward the remaining £2,000 to 2024/25. This means that you have a £5,000 exemption in 2024/25 (£3,000 for the current year plus £2,000 carried over).
The small gift exemption
You can give up to £250 to any number of people each tax year without thinking about IHT. But you cannot use the £250 and £3,000 exemptions for the same person.
This means that if you’re giving money to children or grandchildren, you could give each £250 at Christmas. These family financial gifts would be fully exempt from IHT. But if you also wanted to give one of them £3,000 under the annual exemption, you cannot combine the two. You’ll need to choose which exemption to apply for the child.
Wedding and civil partnership gifts
Special exemptions apply for wedding or civil partnership gifts:
- Up to £5,000 for a child
- Up to £2,500 for a grandchild
- Up to £1,000 for anyone else
You need to give these gifts before or on the day of the wedding or civil partnership ceremony.
Regular gifts from income
Not all gifts have to come from your savings. The UK tax rules allow you to give gifts to family members out of your income, which will not count as part of your IHT. This is known as the “normal expenditure out of income” exemption.
To qualify, the gifts have to meet three conditions:
- Regular pattern: The gifts should be part of a routine, such as monthly, quarterly, or yearly payments.
- From income: The money has to come from your regular income (like salary, pension, or investment income), not from savings or selling assets.
- No impact on lifestyle: The gifts shouldn’t reduce your standard of living or make you dip into savings to cover everyday expenses.
This may mean setting up a standing order to help an adult child with rent each month. You could also pay a grandchild’s school fees or cover the cost of a family holiday every year.
These routine gifts are smart financial ways to support loved ones. Be sure to keep simple records to show that the payments are regular and genuinely come from your income.
Large gifts and the seven-year rule
The first £325,000 of your estate is tax-free, which is known as the nil-rate band. Additionally, if you leave a main residence to your direct descendants, you may also qualify for the residence nil-rate band (up to £175,000), which increases the overall tax-free threshold.
If you give away more than that, the gifts can still be considered outside your estate, but only if you live for seven years. But if you pass away within that timeframe, the gift may be subject to IHT.
The good news is that the tax rate reduces as you live longer, thanks to the taper relief. This only applies if the total value of gifts made in the seven years before death crosses the nil-rate band threshold.
Here’s how taper relief works for larger gifts:
| Years between gift and death | Effective tax applied after taper relief |
| 0-3 years | 40% |
| 3-4 years | 32% |
| 4-5 years | 24% |
| 5-6 years | 16% |
| 6-7 years | 8% |
| 7+ years | 0% |
Timing is key when it comes to larger gifts. Passing on a property or a sizable sum sooner rather than later gives it a better chance of being fully exempt. Many families take this route to share wealth gradually and ease any future tax burden.
A practical approach is to pair bigger gifts with regular, smaller ones that qualify for other exemptions. Be sure to keep records of your gifts. That way, if the seven-year rule ever comes into play, you’ll have everything ready to show.
Gifts between spouses and civil partners
You can transfer money or assets to your spouse or civil partner tax-free if both partners are UK-domiciled. This means you can pass on unlimited amounts during your lifetime or through your will without increasing the value of your estate.
If one partner is not UK-domiciled, the rules change. In this case, the UK-domiciled partner can only transfer up to £325,000 tax-free to their non-domiciled spouse or civil partner. Anything above this amount may count as part of the estate.
This distinction is crucial for planning. UK-domiciled couples have complete flexibility, while mixed-domiciled partners may need to make use of annual allowances or exemptions to avoid unexpected tax charges.
Record-keeping and documentation
Keeping clear records of any gift you give is essential. If you don’t document what you give, it’s harder for executors or HMRC to confirm whether a gift qualifies for tax-free allowances or taper relief.
At a minimum, you should record:
- The date of each gift
- The amount or value given
- The recipient’s name and relationship to you
- The source of funds or assets
A simple gift log or spreadsheet is often enough. You can also keep copies of bank statements, transfer receipts, or written notes to provide extra clarity.
Good record-keeping makes calculations much simpler for your family. It helps ensure that you apply any exemptions or reliefs correctly, reducing the risk of confusion, disputes, or unexpected tax bills later on.
Common mistakes to avoid
When gifting, even small mistakes can undo the tax benefits you’re aiming for. These include:
- Misunderstanding gift limits: Different exemptions apply depending on type of gift, and unused allowances only carry over in limited cases. So, keep an eye on the rules for each gift.
- Relying on informal arrangements: If you cover expenses or give money without keeping proper records, the HMRC might not consider it exempt when reviewing your estate.
- Retaining benefit from a gift: If you give away an asset but continue to use it (for example, gifting a property but living in it rent-free), it could still count for IHT.
- Poor timing: The tax year ends on 5 April. If you miss this deadline, it means you lose that year’s allowance, which can reduce the relief available for your estate.
- Overlooking larger estate implications: Regular small gifts may seem harmless, but without planning, they can push your estate over the IHT threshold and create unexpected liabilities.
Making the most of UK gift tax rules
Understanding the main allowances, such as annual exemption, the small gift allowance, and wedding gift exemptions, can help families pass on wealth in a tax-efficient way. With the right planning, you can make generous gifts without triggering inheritance tax.
Be sure to keep accurate records of dates, amounts, and recipients, and to review your gifting strategy each year before 5 April. If your situation is more complex, consider seeking tailored advice from a qualified financial adviser. By carefully following the rules and seeking professional guidance, you can avoid mistakes and ensure your generosity benefits your loved ones.
FAQs
How much can I gift my children each year without paying tax?
You can give up to £3,000 each tax year in total, free from inheritance tax. This is called your annual exemption. If you didn’t use it in the previous year, you can carry it forward for one year, allowing tax-free gifts of up to £6,000.
What happens if I give more than £3,000 in one year?
Anything above your annual exemption may still be tax-free if it qualifies under other rules, such as small gifts (£250 per person), wedding gifts, or regular gifts out of income. If it doesn’t qualify, the excess becomes a potentially exempt transfer (PET) and may be subject to inheritance tax if you pass away within seven years.
Do I need to declare gifts on my tax return?
In most cases, no. Gifts usually only need to be reported to HMRC after the giver dies if inheritance tax may be due. However, be sure to keep clear records of amounts, dates, and recipients. This helps your executors and avoids disputes later.
Can I give money to help with a house deposit?
Yes, you can use your £3,000 annual exemption for this. Parents can also make wedding gifts of up to £5,000 tax-free. You can still give larger amounts, but they may count as PETs, meaning they could be subject to inheritance tax if you die within seven years.
What counts as income for the regular gifts exemption?
This rule lets you gift from surplus income (for example, salary, dividends, rental income, or pensions) without affecting your £3,000 annual exemption. To qualify, the gifts have to be regular, not reduce your standard of living, and come from income rather than savings.
Are there different rules for gifts to charity?
Yes. Gifts to UK-registered charities, universities, museums, and some political parties are completely exempt from inheritance tax, whatever the amount. They don’t use up your annual exemption, so you can give freely to charitable organisations without worrying about tax.