How much can I gift my child tax-free UK?

You can give your child £3,000 per tax year using your annual exemption (plus £3,000 carried forward from the previous year if unused). You can also give unlimited amounts from your normal income if it doesn't reduce your standard of living, plus £5,000 as a wedding gift. Gifts above these exemptions are potentially exempt transfers — no IHT if you survive 7 years.

What is the 7-year rule for gifting money UK?

If you make a gift that exceeds your annual exemptions, it becomes a potentially exempt transfer (PET). If you survive 7 years from the date of the gift, it falls completely outside your estate — no inheritance tax. If you die within 7 years, taper relief may reduce the tax: full rate within 3 years, reducing to 0% after 7 years. The 7-year clock starts from the date of each individual gift.

Do I need to tell HMRC about gifts to my children?

You do not need to report gifts to HMRC during your lifetime. However, you MUST keep records — date, amount, recipient, and which exemption applies. When you die, your executors must report all gifts made in the 7 years before death on the IHT forms. Poor records can mean HMRC disallows exemptions. Keep a simple gift diary.

Can I give my child money to buy a house without paying tax?

Yes — a gift of money for a house deposit is treated like any other gift. Up to £3,000 per year is covered by the annual exemption. Above that, the 7-year rule applies. There is no gift tax in the UK — the concern is only inheritance tax if you die within 7 years. The child does not pay tax on receiving the gift. Mortgage lenders will want a gifted deposit letter confirming the money is a gift, not a loan.

Gifting Money to Children Tax-Free UK — The 7-Year Rule Explained | PocketWise

There is no gift tax in the UK. You can give anyone as much money as you want during your lifetime without an immediate tax charge. The only tax issue arises if you die within seven years of making a large gift — at which point inheritance tax (IHT) may apply.

The Rules at a Glance

Rule	Detail
Gift tax in the UK	Does not exist — no tax when you make a gift
Inheritance tax on gifts	Only applies if you die within 7 years of a gift exceeding exemptions
IHT rate	40% (on the amount above the nil-rate band)
Nil-rate band	£325,000 — gifts above this may be taxed if you die within 7 years
Annual exemption	£3,000 per year, per person (can carry forward one year)
Small gifts exemption	£250 per recipient per year (unlimited recipients)

Tax-Free Gift Exemptions

Gifts That Are Always Tax-Free

Exemption	Amount	Rules
Annual exemption	£3,000/year	Per person. Unused allowance carries forward one year only
Small gifts	£250 per recipient	Unlimited number of recipients. Cannot combine with annual exemption for same person
Wedding gift — parent	£5,000 per child	Given on or before the wedding
Wedding gift — grandparent	£2,500 per grandchild	Given on or before the wedding
Wedding gift — anyone else	£1,000	Given on or before the wedding
Gifts to spouse/civil partner	Unlimited	Completely exempt — no limit
Gifts to charity	Unlimited	Completely exempt
Normal expenditure out of income	Unlimited	Must come from income, be regular, and not reduce your standard of living
Maintenance of dependants	Unlimited	Providing for a child under 18, elderly relative, or anyone financially dependent

Annual Exemption — Worked Examples

Year	Annual exemption used?	Gift made	Tax-free amount
2024/25	No (carried forward)	—	—
2025/26	Yes — gave £6,000 to daughter	£6,000	£6,000 (£3,000 current + £3,000 brought forward)
2026/27	Yes — gave £3,000 to son	£3,000	£3,000 (current year only — nothing to carry forward)

Husband and wife each have their own £3,000 allowance — so a couple can give away £6,000 per year (or £12,000 if both carry forward).

The 7-Year Rule — How It Works

Any gift above your exemptions becomes a potentially exempt transfer (PET). The clock starts from the date of the gift.

Time before death	IHT rate on the gift
0 – 3 years	40%
3 – 4 years	32% (taper relief)
4 – 5 years	24%
5 – 6 years	16%
6 – 7 years	8%
7+ years	0% — completely outside your estate

Important Points

Taper relief reduces the tax rate on the gift, not the value
Taper relief only applies to gifts that exceed the nil-rate band (£325,000)
If total gifts in the 7 years before death are under £325,000, they use up NRB but no tax is due on the gifts themselves — the impact is that less NRB is available for the remaining estate
Each gift has its own 7-year clock

Worked Example — 7-Year Rule

Detail	Amount
Gift made	£400,000 to daughter in January 2020
Nil-rate band	£325,000
Amount above NRB	£75,000
If donor dies in January 2023 (3 years)	IHT at 40% on £75,000 = £30,000
If donor dies in January 2025 (5 years)	IHT at 24% on £75,000 = £18,000
If donor dies in January 2027 (7+ years)	£0 — gift fully outside estate

Gifts from Normal Expenditure Out of Income

This is one of the most valuable exemptions but is often misunderstood. There is no limit on how much you can give away — as long as:

Condition	What it means
Comes from income	Must be from your regular income (salary, pension, rental income, dividends) — not from savings or capital
Regular pattern	Must form a pattern of regular giving (monthly or annually)
Does not reduce your standard of living	After making the gifts, you can still afford your normal expenses

Common Qualifying Examples

Gift	Why it qualifies
Monthly £500 to a child’s savings account	Regular, from income, pattern established
Paying grandchildren’s school fees each term	Regular, from pension income
Annual gift of £10,000 to each child at Christmas	Annual pattern, from surplus income
Paying life insurance premiums for your children	Regular, from income, for their benefit

Record-Keeping

Keep a gift diary with:

Detail to record	Example
Date	1 March 2026
Recipient	Daughter — Sarah
Amount	£500
Source of funds	Monthly pension income
Exemption relied on	Normal expenditure out of income
Pattern	Monthly — 12th consecutive month

Your executors will need this evidence when completing IHT forms. Without records, HMRC is likely to challenge claims.

Gifting Money for a House Deposit

Question	Answer
Is the gift taxable?	No immediate tax. 7-year rule applies if above exemptions
Does my child pay tax on receiving it?	No — recipients never pay tax on gifts in the UK
Will it affect the mortgage application?	Yes — the lender needs a gifted deposit letter
What’s in the letter?	Confirms money is a gift not a loan, donor has no interest in the property, and it does not need to be repaid
Can I loan the money instead?	A loan is not a gift for IHT — it stays in your estate. Lenders also dislike loans as deposits
Anti-money laundering checks?	The conveyancer will ask for the source of funds — have bank statements ready

Gifted Deposit Letter Template

A gifted deposit letter should include:

Element	Detail
Full name of person gifting	Your full legal name
Relationship to buyer	Parent, grandparent, etc.
Amount of gift	Exact figure
Property address	Address being purchased
Declaration	“This is a gift. I have no interest in the property. The money does not need to be repaid.”
Signature and date	Signed and dated

Most solicitors and mortgage brokers provide a template.

Trusts for Children

If you want to give money to children but keep some control, a trust may be appropriate:

Trust type	Best for	Control	Tax
Bare trust	Children over 18 (or approaching 18)	Low — child can access at 18	Gift falls under 7-year rule
Junior ISA	Tax-free savings for under-18s	Moderate — child accesses at 18	No tax on growth
Discretionary trust	Keeping control over when/how money is distributed	High — trustees decide	Uses NRB; 20% charge above £325,000
Child Trust Fund	If opened before 2011	Low — child accesses at 18	No tax on growth

Related: Trusts Explained | Junior ISA Guide

Gifts to Grandchildren

All the same rules apply. Additional points:

Strategy	Benefit
Use both grandparents’ annual exemptions	£6,000 per year tax-free per couple
Pay into Junior ISA (max £9,000/year)	Tax-free growth
Pay school fees from income	Normal expenditure exemption — potentially unlimited
Wedding gift exemption	£2,500 per grandparent
Specified Adult Childcare Credit	If caring for grandchild while parent works — transfer NI credit

Common Mistakes

Mistake	Consequence
Not keeping records of gifts	Executors can’t prove exemptions — HMRC may charge IHT
Giving away your home but continuing to live in it	Gift with reservation — stays in your estate
Making all gifts at once rather than spreading them	Larger IHT exposure if you die within 7 years
Forgetting the spouse has their own exemptions	Missing £3,000 per year from the other partner
Assuming gifts to children are automatically tax-free	Only up to exemption limits — 7-year rule applies above
Not telling your executors about gifts	Executors could make incorrect IHT returns

Action Checklist

Action	Done?
Check whether your estate might be above IHT thresholds	☐
Start using £3,000 annual exemption every year (each spouse)	☐
Consider regular gifts from income (and document them)	☐
Start a gift diary with dates, amounts, recipients, and exemptions used	☐
Tell your executors about gifts you have made	☐
Review your will alongside your gifting strategy	☐
Take professional advice if your estate exceeds £500,000 (single) or £1 million (couple)	☐