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Inheritance tax free gifts

A potentially exempt transfer is exactly that. If the person making the gift lives survives it for 7 years, the value is excluded from the donor’s estate for inheritance tax (IHT) purposes.
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If the donor dies within the 7 year window, IHT is chargeable on a tapered basis as below.  A reduction in value is also classed as a gift, for example, if a house is sold to a child for less than market value, the difference is classed as a gift.  Gifts between spouses are always exempt.


Other gifts exempt from IHT

Years from gift to death

Tax paid

 <3 years


3-4 years


4-5 years


5-6 years


6-7 years


>7 years


Each tax year, you can make up to £3,000 worth of gifts under an annual exemption.  In addition to this, you can also give away as many gifts as you like of up to £250 per person per tax year.

Other exemptions include:

  • Wedding gifts up to £1,000 (£2,500 for grandchild, £5,000 for child)
  • Normal gifts out of income, for example, birthday or Christmas presents, the cost of which does not affect your standard of living
  • Gifts to charity/political parties
  • Payments towards the living costs of others such as children/elderly relatives.

Kathy Harris

February 2020

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