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Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met.

This article explains how gifting works in inheritance tax planning, including exemptions, allowances, and the seven-year rule.

What is considered a gift?

A gift is anything of value given to another person without receiving full market value in return. This includes:

Money (cash gifts, bank transfers)
Property (houses, land, or buildings)
Valuable possessions (jewellery, antiques, shares, or investments)

Inheritance tax exemptions for gifting

Annual gift allowance
- Each tax year, an individual can gift £3,000 tax-free. If this allowance is not used, it can be carried forward for one year.
Small gifts
- Gifts of up to £250 per person per year are exempt, provided the recipient has not received another tax-free gift from the same person.
Wedding and civil partnership gifts
- Parents can gift £5,000 tax-free, grandparents can give £2,500, and others can give £1,000 towards a wedding or civil partnership.
Gifts to spouses and charities
- Gifts between spouses or civil partners are completely exempt from inheritance tax, as are gifts to charities.

The seven-year rule

If a person gifts more than their annual exemption and then passes away within seven years, the gift may be subject to inheritance tax on a sliding scale (known as taper relief).
If the gift was given less than three years before death, 40% inheritance tax applies.
If the gift was made between three and seven years before death, the tax rate reduces gradually.

Years between gift and death	Tax rate applied
0 – 3 years	40%
3 – 4 years	32%
4 – 5 years	24%
5 – 6 years	16%
6 – 7 years	8%
7+ years	0% (exempt)

Why mental capacity matters in gifting

For a gift to be legally valid, the donor must have full mental capacity to understand its implications. If there is any doubt about an individual’s capacity to make financial decisions, a mental capacity assessment can provide clarity. TSF Assessments are mental capacity assessors and offer expert assessments to confirm whether or not individuals have mental capacity to make lifetime gifts.

Our qualified and registered health professionals can complete an assessment of an individual’s capacity to make a lifetime gift. The relevant information that a person would need to understand when making a gift is set out by Re: Beaney (1978). Our assessments include a detailed evidence-based report that can be used in case of any legal challenge in respect of the gift.

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Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Capacity to litigate

How TSF Assessments can assist with capacity to litigate evaluations

At TSF Assessments, we specialise in providing professional capacity to litigate assessments to support individuals, families, and legal professionals. Our expert assessors ensure that individuals receive evidenced and detailed assessments of their ability to engage in legal proceedings, in the format of an Expert Witness report. Why choose TSF Assessments? Experienced professionals – Our team...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

Gifting and inheritance tax: What you need to know

Gifting is an effective way to reduce inheritance tax liability, but it must be done correctly to comply with HMRC rules. While some gifts are immediately exempt from tax, others may still be subject to inheritance tax if certain conditions are not met. This article explains how gifting works in inheritance tax planning, including exemptions,...

TSF specialise in mental capacity assessments in England and Wales.

Phone: 0333 577 7020
Email: info@tsfassessments.co.uk

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