How Much Money Can You Gift Tax Free in the UK?

Giving financial gifts to loved ones is a generous and thoughtful act, whether you’re helping your children onto the property ladder, contributing to a grandchild’s education, or simply wanting to share your wealth. However, understanding how tax-free gifting works in the UK is essential if you want to ensure that your gift doesn’t come with hidden tax implications.

In the UK, Her Majesty’s Revenue and Customs (HMRC) provides several exemptions that allow you to give money or assets without triggering Inheritance Tax (IHT) or other charges. In this comprehensive 2025 guide, you’ll learn how much you can give, to whom, and under what conditions — all while remaining compliant with tax regulations.

What Does It Mean to Gift Money Tax-Free in the UK?

When you gift money, HMRC sees it as a transfer of value. In most cases, this transfer may be subject to Inheritance Tax if you pass away within a certain period after giving it. However, the tax system also recognises that people want to share their wealth during their lifetime — and that’s where tax-free gift exemptions come in.

Tax-free gifting means giving away money or assets without creating any immediate tax obligation for you or the recipient, as long as the gift falls within specific HMRC exemptions or allowances. These rules help individuals support family members, friends, or causes without incurring a tax penalty.

Understanding the difference between exempt gifts and potentially taxable ones can help you make strategic decisions when it comes to distributing your wealth.

What Is the Annual Gift Allowance in the UK (2025)?

In the 2025/26 tax year, the most commonly used tax exemption is the Annual Gift Allowance, also referred to as the Annual Exemption. This allows you to give away a certain amount each year without it counting towards your estate for Inheritance Tax purposes.

The standard annual exemption is to gift £3000 per person. You can split this between multiple recipients or give the full amount to one individual. If you didn’t use your exemption last year, you’re allowed to carry it forward for one year only, which means you could give away up to £6,000 as gift in a single tax year if unused from the previous year.

This exemption is a valuable way to make small-to-medium-sized gifts regularly without worrying about any tax consequences. Many people use this to support children with university fees, house deposits, or general living expenses.

It’s important to note that this exemption applies to all types of gifts, whether they are in the form of money, personal items, or other assets, as long as they do not exceed the annual limit.

Are There Any Other Gift Tax Exemptions You Can Use?

Yes, in addition to the annual exemption, HMRC provides several other gifting exemptions that you may find beneficial, depending on your circumstances.

One such exemption is the small gifts exemption. This allows you to give up to £250 per person each tax year, provided the recipient has not already received part of your £3,000 annual exemption. You can give these smaller gifts to as many people as you like, making it ideal for holiday presents, birthdays, or casual support.

There’s also the wedding or civil partnership gift exemption. Depending on your relationship with the person getting married, you can gift:

• Up to £5,000 to a child
• Up to £2,500 to a grandchild or great-grandchild
• Up to £1,000 to any other person

These gifts must be made on or shortly before the wedding or civil ceremony to qualify as exempt.

Another important exemption applies to regular gifts made from surplus income. If you have income left over after meeting your usual living costs, you can make gifts from this surplus regularly — for instance, contributing monthly to a grandchild’s savings account — without it affecting your estate’s tax liability. However, these gifts must be consistent, clearly documented, and must not reduce your standard of living.

Here is a summary table of key gift exemptions for 2025:

Type of Gift	Limit (2025)	Conditions
Annual exemption	£3,000	Per tax year, total across all recipients
Unused annual exemption carryover	£3,000	Only for one previous tax year
Small gift exemption	£250	Per person, not combined with annual exemption
Wedding or civil partnership gift	£1,000–£5,000	Depends on relationship and timing of gift
Gifts from surplus income (Like even £50000 as gift)	Unlimited	Must be regular, documented, and from excess income

How Does the Seven-Year Rule Affect Your Gifts?

One of the most significant aspects of gifting in the UK is the Seven-Year Rule, which comes into play when you give away more than your available exemptions.

If you give a gift that exceeds your tax-free allowances and then die within seven years, that gift may be included in your estate for Inheritance Tax purposes. These are referred to as Potentially Exempt Transfers (PETs).

However, if you live for more than seven years after making the gift, it becomes completely exempt from IHT, no matter how large it was.

In the event you pass away within the seven-year window, the value of the gift is assessed, and taper relief may apply to reduce the amount of tax due. This relief gradually reduces the IHT owed the longer you live after making the gift.

Here’s how taper relief works:

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

This rule highlights the importance of planning large gifts early, especially if they form part of your estate reduction strategy.

Can You Gift Money to Your Children Without Paying Tax?

Yes, you can. Gifting money to children is one of the most common forms of tax-free gifting in the UK, and there are multiple allowances you can use.

You can give up to £3,000 per year to your child under the annual exemption, and if you’re contributing to their wedding, you may be able to give an additional £5,000 tax-free. If the gift comes from your surplus income, such as part of a monthly support arrangement, that too may qualify for exemption as long as it is regular and properly documented.

For minor children, however, there’s an important consideration. If the gift generates income — for example, if it’s placed into a savings account — and the income exceeds £100 per year per parent, then it may be taxed as part of the parent’s income. This does not apply to adult children, who can receive gifts and manage them independently.

Ultimately, giving money to your children is not only allowed — it’s encouraged by many as a way to provide meaningful financial support. You simply need to stay within the HMRC guidelines to avoid any unexpected tax bills.

What Happens If You Exceed the Tax-Free Gift Limit?

If you give more than your combined gift exemptions, that doesn’t immediately trigger a tax charge. However, the gift becomes a Potentially Exempt Transfer, and it may become taxable if you die within seven years.

In such a scenario, the value of the gift will be added back into your estate for the purposes of calculating Inheritance Tax, which could result in a tax bill for your estate or even for the recipient of the gift if specific conditions apply.

While cash gifts are not subject to Capital Gains Tax, if you gift property, shares, or other assets, Capital Gains Tax may apply at the time of transfer, depending on the nature of the asset and its increase in value.

For any gift that exceeds your tax-free allowances, especially larger gifts, it’s advisable to maintain detailed records and consider completing an IHT403 form if the gift is significant.

What Gifts Are Automatically Tax-Free Regardless of Amount?

Some gifts are always tax-free, regardless of how much they’re worth or when they’re given. These include gifts between spouses or civil partners (provided both live permanently in the UK) and gifts made to registered charities or political parties.

Additionally, gifts made from regular surplus income, when properly recorded, can be made tax-free even if they add up to significant amounts over time. The key is that these gifts must be:

• Regular (e.g., monthly, quarterly)
• Made from income, not capital
• Not detrimental to your normal standard of living

This is a powerful exemption for those who have a high income and want to regularly support family members without adding to their taxable estate.

Common Myths About Tax-Free Gifting in the UK

Many misconceptions surround the topic of gifting and taxation in the UK. It’s important to separate fact from fiction to avoid unintentional tax issues.

One common myth is that you can give unlimited money to your children tax-free. While you can give any amount, only the amount within your exemptions is immediately tax-free — the rest may become subject to IHT under the seven-year rule.

Another false belief is that cash gifts are never taxable. In fact, if they exceed your exemptions and you die within seven years, they may attract tax.

Some people assume that you don’t need to keep records for small gifts. Even if your gifts fall under the exemption thresholds, keeping records is critical in case HMRC ever requires proof.

Finally, there’s the assumption that only the recipient pays tax. In reality, Inheritance Tax applies to the donor’s estate, but if there are insufficient funds, the recipient could be responsible.

Understanding these myths will help you make well-informed decisions and avoid unexpected tax consequences.

How to Stay Compliant with HMRC Gift Tax Rules?

To remain on the right side of HMRC, you should adopt several best practices when making gifts.

Keep detailed written records of every gift you make, especially if it exceeds your small gifts exemption. Record the date, amount, recipient, and the type of exemption you believe applies. This will make it easier for your executors and family members to manage your estate, and it could help defend your gifting decisions if HMRC ever questions them.

You should also avoid mixing exemptions. For example, if you use your £3,000 annual exemption for a particular recipient, you cannot also apply the small gift exemption for the same person in the same year.

If you’re making gifts from surplus income, document your income and outgoings carefully, and note each gift as part of a regular giving pattern. A financial adviser or tax planner can help you assess whether you’re applying exemptions correctly.

Here is a simple checklist to stay compliant:

Action	Why It’s Important
Record all gifts made	Helps verify exemption use and timelines
Track annual and small exemptions	Prevents accidental tax breaches
Document gifts from surplus income	Proves eligibility for income-based exemption
Seek professional advice	Avoids costly errors on complex gifts

How Much Money Can You Gift Tax-Free in the UK?

Conclusion: Plan Your Gifts Smartly in 2025

Tax-free gifting in the UK is entirely possible — and often very advantageous — when done with proper planning and awareness of HMRC rules. By using your annual exemption, understanding the seven-year rule, and keeping detailed records, you can make generous financial gifts to family and friends without worrying about future tax liabilities.

Whether you’re helping a child buy their first home or building a long-term wealth transfer strategy, the key to success is clarity, timing, and compliance. If your plans involve substantial gifts or complex family situations, don’t hesitate to consult a financial or tax adviser to tailor the best approach for your circumstances.