Inheritance Tax Gifts Before 5 April: UK Allowances Explained

As this UK tax year draws to a close on 5 April, here’s a clear guide to what you can gift and still make the most of your tax-free allowances.

Whether you’re planning to support family, mark a special occasion or reduce future Inheritance Tax (IHT) liability, it helps to understand the current rules. UK tax rules don’t impose a separate “gift tax,” but gifts can affect Inheritance Tax, Capital Gains Tax and Inheritance Tax if you don’t use the available exemptions properly. It is always worth seeking advice from an independent financial advisor or tax specialist to ensure you are planning correctly.

If you are reviewing lifetime gifts as part of a wider estate strategy, our inheritance tax planning solicitors can help.

Annual Exemption: Give Up to £3,000 Before 5 April

Every individual in the UK has an annual gift allowance of £3,000. This is known as the annual exemption. You can give away up to £3,000 worth of gifts in this tax year (6 April to 5 April) without any parts of the gift being counted towards your estate for IHT purposes.

You can:

• Give the full £3,000 to one person, or
• Split it between several people

If you didn’t use all of your annual exemption last tax year, you can carry it forward - but only for one year. This means you could potentially give up to £6,000 tax-free in this tax year if you carry forward the previous year’s unused amount.

Small Gifts Exemption: When the £250 Rule Applies

On top of your annual exemption, you can give as many small gifts of up to £250 per person as you like each tax year. These are often used for birthdays or holiday presents, and there’s no limit on how many different people you can give them to - provided you have not also used your £3,000 annual exemption on that same person.

For example:

You might give £250 to a friend for their birthday and still use your full annual exemption of £3,000 for someone else.

But you cannot give someone £3,000 and then also give them £250 under the small gift rule in the same tax year.

Wedding and Civil Partnership Gifts: What Family Members Can Give

Specific wedding-gift allowances are available in addition to your annual exemption. These depend on your relationship to the recipient:

• £5,000 tax-free if the gift is to your child
• £2,500 tax-free for a grandchild or great-grandchild
• £1,000 tax-free to anyone else

These gifts must be made on or shortly before the date of the wedding or civil partnership to qualify and the marriage or civil partnership must actually take place; otherwise the exemption does not apply. You can also combine this with the annual exemption (e.g. gift £5,000 + £3,000 to a child in the same year) - but you cannot use the small gift allowance for that same person in addition to these allowances.

Where there are children from previous relationships, gifts should be considered alongside your Will and wider estate arrangements, particularly in blended families where balancing competing interests can be more complex. Our guide to estate planning for blended families explains some of the key issues to consider.

Gifts Out of Income: When Regular Payments Are Exempt

Another useful rule allows you to make regular gifts out of your surplus income, provided:

• The gifts are part of your normal pattern of spending (e.g. regular monthly support), and
• They do not reduce your standard of living

These gifts are immediately exempt from IHT - but HMRC requires evidence (bank statements, clear budget records) to show they genuinely come from surplus income.

Do Gifts to a Spouse or Civil Partner Count for Inheritance Tax?

Gifts between spouses or civil partners are generally exempt from IHT, no matter the amount or timing and usually there is no annual limit for this type of gift so long as the recipient spouse is UK-domiciled or a long-term UK resident. If that is not the case, then the spouse exemption for gifts is limited to the nil‑rate band (currently £325,000).

The 7 Year Rule for Inheritance Tax Gifts

If you make a gift that doesn’t fall under an exemption - for example, an amount larger than your annual allowance - it won’t be taxed immediately. Instead, it becomes a Potentially Exempt Transfer (PET). If you live for at least seven years after making the gift, it will not count towards your estate for IHT.

If you die within seven years, the gift may be brought back into account for IHT purposes, with taper relief potentially reducing the tax owed (less tax the further from the date of death).

Records to Keep When Making Tax-Free Gifts

Even though gifts aren’t taxed when given, it’s good practice to keep a record of:

• Who received the gift
• How much it was worth
• Which exemption you’re using

This can be hugely helpful for executors and loved ones when dealing with estate tax matters in the future.

Tax-efficient gifting is only one part of protecting your estate, and our guide to avoiding common mistakes in estate planning explains why gifts, Wills and record-keeping should all work together as part of a wider estate planning strategy.

Why Planning Matters Before 5 April

As the UK tax year ends on 5 April, now is a sensible time to:

• Use up your unused annual exemption
• Make planned gifts for weddings or life occasions
• Regularise any “normal expenditure” gifts
• Ensure your larger gifts are structured clearly

Understanding these rules can also help reduce Inheritance Tax exposure later if your estate is likely to surpass the nil-rate band threshold.

Speak to a Solicitor About Inheritance Tax Planning

For assistance planning your gifts ahead of the tax year end, speak to your financial adviser and or Solicitor in plenty of time. At Stephen Rimmer, our inheritance tax solicitors can assist you with planning for gifts ahead of the tax year end.

If you are considering larger lifetime gifts as part of your estate planning, read our guide on how a last-minute gift could save your heirs £140,000 in inheritance tax for another example of how timely planning can reduce inheritance tax exposure.

Disclaimer: The content of this website blog is for general awareness and insight. This is not legal or professional advice and readers should not act upon the information provided, they should seek professional advice based on their own particular circumstances. The law may have changed since this article was published.

FAQs

What happens if I exceed my annual gift exemption?

If you give more than £3,000 to a single person not covered by another exemption, the excess becomes a Potentially Exempt Transfer and could count towards IHT if you die within seven years.

Can I use both wedding gift and annual allowances for the same person?

Yes — but you cannot also use the small gift allowance for that same person in the same tax year.

Do Christmas and birthday presents count toward allowances?

Small gifts of up to £250 to any number of people are exempt — even for occasions like Christmas or birthdays — provided no other exemption has been used on that person.

Are gifts to charity tax-free?

Yes — gifts to registered charities are exempt from Inheritance Tax, regardless of size. Charitable gifts may also qualify for income tax relief through Gift Aid.