Can I gift money to reduce inheritance tax?
Quick answer
Yes. Gifting during your lifetime is a legitimate way to reduce inheritance tax. You can give away £3,000 a year (the annual exemption), £250 to any number of people, and regular gifts out of surplus income, all immediately exempt. Larger gifts fall under the 7-year rule — free of inheritance tax if you survive seven years.
Detailed explanation
The rules reward planning ahead. The key exemptions are:
- Annual exemption: £3,000 of gifts per tax year (carry one year forward).
- Small gifts: up to £250 per person, per year.
- Wedding gifts: up to £5,000 to a child, £2,500 to a grandchild, £1,000 to others.
- Gifts from surplus income: regular gifts that don't affect your standard of living.
- Larger gifts: exempt after seven years under the 7-year rule.
Example scenario
Each year a couple gives £3,000 each to their daughter (£6,000 total) using their annual exemptions, plus £250 each to several grandchildren. Over a decade this moves a substantial sum out of their estates with no inheritance-tax strings attached.
Keep records. Note the date, amount and exemption used for each gift — it helps your executors prove the position to HMRC later.
What happens next?
- Complete the questionnaireA few guided questions about you, your family and your wishes.
- Human reviewYour answers are checked by the ClearLegacy editorial team for completeness.
- Receive your documentsYour will and supporting paperwork are produced, ready to print.
- Sign correctlyClear instructions on signing and witnessing so the will is legally valid.
- Protect your familyYour wishes are recorded and your loved ones are spared the intestacy default.
Sources
- GOV.UK — How Inheritance Tax works (gifts and the 7-year rule)
- GOV.UK — Rules on giving gifts (annual and small-gift exemptions)
- HMRC — Inheritance Tax manual: potentially exempt transfers
- Reviewed by
- ClearLegacy editorial team
- Last reviewed
- June 2026
- Next review
- December 2026
- Jurisdiction
- England & Wales
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