Gifting can be a powerful way to transfer wealth during your lifetime, helping family members, reducing Inheritance Tax (IHT) exposure, and giving you the satisfaction of seeing your support put to use.
But the UK gifting rules are not always intuitive. While some allowances are simple and automatic, others require structure, documentation, or long-term planning to be effective.
This short guide outlines the key exemptions and strategies available, tailored to individuals with substantial estates who are seeking clarity and control.
Each individual can gift up to £3,000 per tax year, free from IHT.
In addition to your annual exemption, you may give £250 per person, per tax year to as many individuals as you like.
This is often used for birthday or holiday gifts across a wider family.
Certain one-off gifts made in celebration of marriage or civil partnership are exempt from IHT:
These can be used in addition to your annual exemption in the same year.
Perhaps the most overlooked exemption. You can make regular gifts from surplus income, provided:
This exemption has no upper limit, but you must keep clear records, including proof that the gifts are from income and not impacting your financial position.
This route is especially powerful for clients with strong pension income, dividends, or rental yields.
Gifts that exceed your exemptions are classed as PETs. These are free from IHT only if you survive seven years from the date of the gift.
If you die within seven years, the gift may be taxed, depending on its value and the total of previous gifts.
Note: Henry Dannell does not provide tax advice. All PET strategies should be reviewed with a qualified tax adviser.
If you give an asset, such as a property, but continue to use it or benefit from it (e.g. living in a house rent-free), the gift will still be counted as part of your estate for IHT purposes.
This is known as a Gift with Reservation of Benefit (GROB) and is a common source of confusion.
It is possible to resolve this by paying market rent or removing the benefit entirely, but this requires careful planning.
Trusts can be used to gift assets while retaining a level of control or oversight, especially where:
Trusts are subject to their own IHT rules, including a nil-rate band every seven years and potential exit and periodic charges.
When combined with life insurance or surplus income gifting, trusts can play a central role in tax-efficient legacy planning.
Whichever gifting strategy you pursue, documentation is critical.
Executors may be asked to account for these gifts when settling your estate. Clarity now will prevent confusion later.
At Henry Dannell, we work closely with clients, tax advisers, and legal professionals to align gifting strategies with estate structure, liquidity planning, and long-term financial independence.
If you are considering how gifting fits into your overall wealth plan, we would be pleased to offer a tailored conversation, discreetly, and with the foresight it deserves.