How Much Money Can Be Legally Given to a Family Member as a Gift UK: A Guide to Tax-Free Gifting and Allowances

If you’re thinking of supporting your children with a house deposit, helping a grandchild through university, or simply sharing your wealth, you might be wondering: How much money can be legally given to a family member as a gift in the UK?

The good news is: there’s no strict legal limit on how much you can gift. However, the moment you go over certain thresholds, you may run into inheritance tax (IHT) rules. This guide explains how to gift money legally, when tax applies, and how to plan smarter.

Why Do People Gift Money to Family Members in the UK?

Common Reasons for Gifting (Education, House Deposit, Support)

You might choose to gift money to:

• Help your child buy their first home
• Support a grandchild’s university fees
• Offer financial help during tough times
• Celebrate Family member weddings, birthdays or new babies

In all these cases, gifting can be a meaningful way to support loved ones.

When Gifting Becomes a Tax Planning Strategy?

• Gifting assets or money can be a smart UK tax planning tool.
• By giving away parts of your estate during your lifetime—especially within the annual gift allowance—you may reduce Inheritance Tax liabilities.
• Gifts to spouses, charities, or small annual gifts are usually exempt. Strategic gifting can help preserve family wealth and minimize future tax burdens. Always document gifts and consider the 7-year rule for larger amounts.

What Counts as a Legal Gift?

In the UK, a legal gift is something voluntarily given without expecting anything in return.

• It’s given freely (not a loan)
• You don’t expect repayment or compensation
• You give up control over the money

Common legal gifts include money, property, and personal items. Gifts must not be made under pressure or deceit, and for tax purposes, larger gifts may be subject to rules like the 7-year rule for Inheritance Tax. HMRC may investigate if gifts seem like “hidden assets” or tax avoidance, so clarity is key.

How Much Money Can Be Legally Given to a Family Member as a Gift UK?

The £3,000 Annual Exemption Explained

Each tax year (6 April to 5 April), you can give away up to £3,000 in total without it being added to your estate for inheritance tax purposes.

Key facts:

• This is called the annual exemption
• It can be split between multiple people (e.g., £1,500 each to two children)
• If unused, you can carry it forward for one year, doubling it to £6,000

Small Gift Allowance for Occasions Like Birthdays and Weddings

Additional tax-free allowances include:

• Small gifts up to £250 per person, per year, for any number of people (if they didn’t receive any part of the £3,000 allowance)
• Wedding gifts:
  • £5,000 for a child
  • £2,500 for a grandchild or great-grandchild
  • £1,000 for anyone else

These allowances are in addition to your annual £3,000 exemption, but they must be given before or on the date of the wedding to qualify. These are also exempt from IHT and can be used alongside the annual allowance.

Gifts from Surplus Income—What Qualifies?

In the UK, if you have income left over after covering your regular living expenses, you can gift this surplus to family members without it counting towards your estate for Inheritance Tax purposes.

To qualify:

• Gifts must be regular – for example, monthly or annual contributions.

• They must come from income – such as salary, pension, or investment returns, not savings or assets.

• Your lifestyle must remain unaffected – you should still afford your normal living costs after making these gifts.

• Keep records – track your income, spending, and the gifts made to prove eligibility if asked by HMRC.

This is a helpful way to support loved ones while reducing future inheritance tax liabilities. For peace of mind, always consult a tax advisor.

What About Larger Gifts Over the Exempt Limit?

The 7-Year Rule and Potentially Exempt Transfers (PETs)

Gifts over the allowances become Potentially Exempt Transfers (PETs). These are only subject to IHT if you die within 7 years of making the gift.

• If you live beyond 7 years: No tax
• If you die within 7 years: It may be taxed as part of your estate

This is known as the 7-year rule.

Taper Relief—How Tax Reduces Over Time

If the gift is more than £325,000 and you die within 3–7 years, taper relief reduces the tax owed:

Years Between Gift and Death	IHT Payable
0–3 years	40%
3–4 years	32%
4–5 years	24%
5–6 years	16%
6–7 years	8%
7+ years	0%

This only applies if the gift exceeds the nil-rate band (£325,000).

When Does a Gift Become Liable for Inheritance Tax?

A gift becomes liable for Inheritance Tax (IHT) if you die within 7 years of giving it and the total value of gifts exceeds the £325,000 threshold (called the nil-rate band).

Here’s a quick breakdown:

• No tax if you live 7 years or more after the gift.

• Tax may apply if you die within 7 years and the gift pushes your estate over £325,000.

• Taper relief can reduce the tax if you die between 3 and 7 years after the gift.

Tip: Keep records of all gifts to help your estate avoid unexpected tax.

Can You Give Unlimited Money Without Paying Tax?

The Difference Between Legal Giving and Tax-Efficient Giving

Legally, you can gift any amount to a family member. However, for it to be tax-efficient, you must:

• Stay within exemptions (like the £3,000 annual allowance)
• Live at least 7 years after giving large sums
• Ensure gifts from surplus income are well documented

Gifting Money to Spouses or Civil Partners—Are There Limits?

In the UK, you can give unlimited amounts of money or assets to your spouse or civil partner during your lifetime without any Inheritance Tax, as long as:

• They are permanently living in the UK, and

• You are legally married or in a registered civil partnership.

There are no value limits on these gifts, and they don’t count towards your annual exemptions.

However, if your spouse or partner is not UK-domiciled, there may be a lifetime limit of £325,000 for tax-free gifts—anything above this could be taxed.

Important: This exemption does not apply to unmarried couples, even if you’ve lived together for many years.

What HMRC Looks at When Gifts Are Investigated

When HMRC investigates gifts, they check whether the gift should be included in the estate for Inheritance Tax (IHT). Here’s what they look at:

• Date of the gift – to see if it was made within 7 years of death.

• Value of the gift – to calculate if it affects the IHT threshold.

• Recipient details – who received the gift and if they’ve had other gifts.

• Source of funds – whether the gift came from income or savings.

• Gift records – including bank transfers, written notes, or agreements.

• Benefit retained – if you still benefited from the gift (like living in a house you “gave away”), it may not count as a true gift.

Keeping clear records can help avoid issues if HMRC reviews your estate.

Reporting and Documenting Your Gifts

Do You Need to Tell HMRC About a Gift?

You usually don’t need to report small gifts. However, you should declare:

• Larger gifts if you die within 7 years
• Gifts from surplus income (for your estate to claim exemption)
• Any PETs that exceed the nil-rate band

Keeping Records—Why It’s Crucial

Maintain a gifting log with:

• Dates of gifts
• Amounts and recipients
• Reason for gift (birthday, deposit, etc.)
• Income statements (if gifting from surplus)

This helps your executor later, and protects your estate from unexpected tax bills.

What Happens If the Giver Passes Away Within 7 Years?

The gift will be counted as part of their estate, and if the combined value is over £325,000, inheritance tax may be due—unless taper relief applies.

If someone gives a gift and dies within 7 years, it may be subject to Inheritance Tax (IHT). Here’s what happens:

• The gift is added to the value of the estate.

• If the total value of the estate (including gifts) is over £325,000, IHT may apply.

• The person who received the gift might have to pay the tax if it’s due.

Taper Relief:

If the person dies 3 to 7 years after giving the gift, the tax rate can be reduced:

• 3–4 years: 32%

• 4–5 years: 24%

• 5–6 years: 16%

• 6–7 years: 8%

• 7+ years: No tax

Keeping records of gifts helps avoid confusion or unexpected tax for your loved ones.

Gifting Scenarios and Their Tax Implications

Scenario 1: Gifting to Children or Grandchildren

You give £10,000 to your daughter:

• £3,000 for child covered by annual exemption
• £7,000 becomes a PET
• If you live 7 years: No tax
• If you die within 7 years:  It may be taxed

Scenario 2: Helping with a First Home Purchase

You give your son £30,000 for a deposit:

• Counted as a PET
• Must survive 7 years to avoid tax
• Should be documented clearly as a gift, not a loan

Scenario 3: Gifting to Reduce Estate Value for IHT

You make regular payments of £500/month to your grandchild from pension income:

• If it’s from surplus income and doesn’t affect your lifestyle:  No IHT
• Best to keep detailed records as proof

Gift Amounts vs Tax Status Summary

Gift Type	Tax-Free?	Conditions
Annual exemption (£3,000)	Yes	Per year, can be split or carried over one year
Small gifts (£250)	Yes	Unlimited recipients if not using £3,000 exemption
Wedding gifts	Yes	Varies: £5k (child), £2.5k (grandchild), £1k (others)
Surplus income gifts	Yes	Must be regular, documented, and not affect lifestyle
Gifts over exemptions	No	Become PETs, taxable if giver dies within 7 years
Gifts to spouse/civil partner	Yes	Unlimited if both UK domiciled

Conclusion: Plan Smart, Gift Legally, and Protect Your Legacy

So, how much money can be legally given to a family member as a gift in the UK?
As much as you like—provided you understand the tax rules.

To recap:

• Use your £3,000 annual exemption wisely
• Consider the 7-year rule for larger gifts
• Record and report gifts properly
• When possible, gift from surplus income
• Consult a financial adviser for complex estates

Smart gifting not only helps your loved ones now—it also reduces the tax burden later. Plan ahead, stay within the rules, and give with peace of mind.

 FAQs About Gifting Money to Family in the UK

Can I Give My Child £20,000 Without Paying Tax?

Yes, but it’s not fully exempt. £3,000 may be tax-free via the annual allowance; the remaining £17,000 becomes a PET—only taxed if you die within 7 years.

What’s the Maximum I Can Give Before It’s Taxable?

There’s no legal cap, but you must consider:

• The £3,000 exemption
• Surplus income gifts
• 7-year survival for large gifts

Is There a Limit on How Many People I Can Gift To?

No. You can gift to as many people as you like using:

• The £250 small gift allowance
• The £3,000 exemption split across recipients

Does the Receiver Ever Pay Tax on a Gift?

No. In the UK, inheritance tax is paid by the estate, not the recipient. The receiver pays nothing upfront, but tax may apply later depending on circumstances.