Gifting money to children and family

The short answer

There is no limit on what you can give away and no tax to pay at the point of giving. What matters for inheritance tax is whether the gift is exempt, and if it is not, how long you live afterwards.

Most people's gifting falls into one of three categories: gifts that are exempt immediately, gifts that become exempt after seven years, and gifts that were never going to work because you kept the benefit of whatever you gave away.

Gifts that are exempt straight away

• The annual exemption. £3,000 each tax year, and if you did not use last year's you can carry it forward for one year only, so up to £6,000. This is per person giving, so a couple can do double.
• Small gifts. Up to £250 per person per tax year, to as many different people as you like. You cannot combine this with the annual exemption for the same recipient.
• Wedding gifts. £5,000 to a child, £2,500 to a grandchild or great-grandchild, £1,000 to anyone else.
• Gifts to a spouse or civil partner, which are unlimited provided they are UK domiciled or long-term UK resident.
• Gifts to charity, which are unlimited.
• Gifts out of normal expenditure. The most useful and most overlooked. See below.

Gifts out of normal expenditure

This exemption is unlimited in amount, immediately effective, and almost nobody uses it properly. It covers regular payments made out of your income, provided three things are true: the gift is part of a pattern rather than a one-off, it comes from income rather than capital, and making it leaves you able to maintain your usual standard of living.

Paying a grandchild's school fees monthly, or making a standing order to a child every month, can fall within this. A single large transfer out of savings does not.

The exemption lives or dies on evidence. HMRC will want to see that the pattern existed and that the money came from income. That means keeping a record from the start: what you gave, to whom, when, and what your income and outgoings were. Deciding to claim this retrospectively, on someone else's behalf, after a death, is very much harder.

The seven-year rule

Gifts that are not exempt are called potentially exempt transfers. If you live seven years after making one, it falls out of your estate entirely. If you die within seven years, it comes back into the calculation.

Taper relief is widely misunderstood. It reduces the tax on the gift, not the value of the gift, and it only applies once the gift has used up your nil rate band. So for many estates, taper relief makes no difference at all. The relief runs on a sliding scale from three years onwards, reaching zero tax at seven years.

One more thing that catches people: gifts are set against your nil rate band in the order you made them, earliest first. So an early gift can absorb the allowance and leave a later one fully exposed.

Where gifting goes wrong

• Keeping the benefit. Giving your house to your children while continuing to live in it rent-free is a gift with reservation of benefit. It stays in your estate. This is the single most common mistake.
• Giving away what you might need. There is no mechanism for getting it back. Care costs, a change in health or simply living longer than expected can turn a sensible gift into a serious problem.
• Capital gains tax. Giving away an asset that has grown in value can trigger a CGT charge for you, even though no money changed hands. Gifting the family home you no longer live in is the usual example.
• Deprivation of assets. If you may need care, a local authority can look at gifts made to reduce your assessable capital. There is no fixed time limit on how far back they can look. Our guide to care fees and your home covers this.
• No record. Your executors will need to list gifts made in the seven years before death. If nobody wrote them down, that is a genuine problem.

Keep a record from the start

A simple list is enough: date, amount, recipient, and which exemption you are relying on. For gifts out of income, add a note of your income and normal outgoings for that year. Keep it with your will. This costs nothing now and saves your executors a great deal later.

How this fits with pensions

From April 2027 most unused pension funds count towards your estate, which has made gifting more relevant for people who had been planning to pass a pension on instead. But money drawn from a pension to fund a gift is taxable as income when you take it out, so the two decisions interact. See inheritance tax on pensions from April 2027.

This page is general information about the rules and does not constitute advice.

Last reviewed: 17 September 2026. Next review: Annually.