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Home > News > Gifting and inheritance tax explained

Gifting and inheritance tax explained

21 July 2021 | Heledd Wyn

As part of inheritance tax planning, or simply as part of passing on wealth to the next generation, you may consider gifting money or property to family or friends. However, it is important to understand several things about gifting and inheritance tax.  

In this article, specialist inheritance tax and planning solicitor Heledd Wyn provides a brief overview of gifting and inheritance tax, including who you can gift to, how much you can gift, and what it means if you continue to benefit from the gift. 

How to avoid inheritance tax  

One of the easiest ways to mitigate your inheritance tax liability is to gift money (or property) to friends, family, or charity while you are still living. There are some gifts you can give in your lifetime which will not incur tax after your death, including gifts to your spouse or civil partner. If you make a gift seven years before your death, it will usually be excluded from the value of your estate for inheritance tax purposes. Gifting can be a complex area, so you should speak to a solicitor about gifts as part of the estate planning process. 

Who can I give gifts to and avoid inheritance tax? 

Gifts to your spouse or civil partner are usually tax-free, however, this does not apply to unmarried partners or cohabitants.   

If you wish to leave gifts to other family members or friends, you should put some planning into the process to determine the most tax-efficient way to do this. There is an annual exemption for inheritance tax of up to £3,000 each year you are alive. You can roll over your exemption amount for up to one year. So, for example, if you do not use any of your allowance in 2021, you can gift up to £6,000 in 2022. 

Small gifts  

You can give small gifts of up to £250 per person, such as for birthdays or Christmas presents, unless another exemption has been used for the same person.  

Wedding gifts  

There is also an exemption for wedding gifts, with how much you can gift dependent on your relation to the couple getting married. If you are a parent, you can gift up to £5,000, if you are a grandparent or great-grandparent you can gift up to £2,500, and for everyone else, the exemption threshold is £1000.  

Retained benefit  

You cannot gift someone something if you will still benefit from the gift in your lifetime. The most common example is where a parent gifts their home to their child but continue to live in the property rent-free until they die. When this is the case, the property will still form part of the estate in the event of death. 

Specialist inheritance tax and planning solicitors 

Inheritance tax can be complicated and confusing. A specialist solicitor can help you plan your estate and make the best use of available tax reliefs, giving you peace of mind that your family will inherit with the minimum amount of payable inheritance tax. 

Our team of inheritance tax and planning experts are on hand to discuss your situation and provide you with practical advice. We offer a personal, bespoke service tailored to your individual needs. Please get in touch by calling 0117 906 9400 or email 

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

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