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By Does Your Duck Quack

Inheritance tax and gifting: allowances, rules and records

Inheritance tax and gifting explained: check 2026–27 allowances, the seven-year rule, gifts from income and records before making plans.

Checked: 13 October 2026 · Next review: 13 April 2027 · Applies to: UK, with nation notes
How this guide was prepared

Purpose: rights guidance · Level: detailed

Checked by: Does Your Duck Quack. Sources are linked below; seek professional advice for individual circumstances.

The short answer

What to do first

Inheritance tax and gifting explained: check 2026–27 allowances, the seven-year rule, gifts from income and records before making plans.

Start here: For 2026–27, the standard nil-rate band is £325,000. A residence nil-rate band of up to £175,000 may apply when a qualifying home passes to direct descendants. It tapers for estates above £2 million and is not available in every case. Debts, ownership, trusts, earlier gifts and reliefs affect the calculation, so do not assume a home adds the full amount.

Visual guides

See the decision at a glance

2026–27 allowances at a glance
  1. Nil-rate band£325,000 for 2026–27; GOV.UK says it is fixed through 5 April 2031.
  2. Residence bandUp to £175,000 may apply to a qualifying home passing to direct descendants.
  3. Standard rate40% on the taxable part; a qualifying charitable gift may allow 36% on relevant parts.
  4. Taper thresholdThe residence band tapers for estates above £2 million.
Gifts that are usually exempt
  1. Annual exemptionUp to £3,000 total in 2026–27, with limited carry-forward from the previous tax year.
  2. Small giftsUp to £250 per person may qualify if another gift allowance is not used for that recipient.
  3. Wedding giftsSeparate limits apply: £5,000 to a child, £2,500 to a grandchild, or £1,000 to another person.
  4. Surplus incomeRegular gifts may qualify when affordable from income after usual living costs; keep records.

Scope of this guide

This guide helps you understand the options and questions to ask. It is not personal medical, legal or financial advice. Check the official sources for your nation and seek qualified help for high-stakes decisions.

Who this guide is for

People reviewing gifts, wills or family finances, and relatives who need to understand inheritance tax without confusing it with care charging.

Inheritance tax depends on an estate’s value, earlier gifts, exemptions, reliefs and beneficiaries. A home or large transfer can make the rules difficult to follow; the amount due is not worked out from one allowance alone. Figures below state the tax year or effective date checked. This is general information, not tax or legal advice. Before acting on an estate plan or substantial gift, get independent legal advice or regulated financial advice.

What to prepare and ask for

1. Start with the allowances and the estate as a whole

For 2026–27, the standard nil-rate band is £325,000. A residence nil-rate band of up to £175,000 may apply when a qualifying home passes to direct descendants. It tapers for estates above £2 million and is not available in every case. Debts, ownership, trusts, earlier gifts and reliefs affect the calculation, so do not assume a home adds the full amount.

2. Check whether a spouse or civil partner has unused bands

An unused proportion of a spouse or civil partner’s nil-rate band can generally transfer to the survivor’s estate. The residence band may also transfer if its conditions are met. It is not automatically a simple doubling: the first estate, home, beneficiaries and evidence matter. Keep the first will and estate papers so personal representatives can support a claim.

3. Understand rates and charitable giving

The standard rate is 40% on the taxable part of an estate above the available thresholds. A reduced 36% rate may apply to qualifying parts of an estate when at least 10% of the relevant net value is left to charity. This is a technical calculation, not simply 10% of the total assets. If charitable giving is part of a will, ask for the figures to be checked against the estate’s actual composition and professional guidance.

4. Record gifts and exemptions carefully

The 2026–27 annual exemption is £3,000 in total, with limited carry-forward from the previous tax year. Small gifts up to £250 per person may qualify if no other gift allowance is used for that recipient. Wedding or civil partnership gifts have separate limits: £5,000 to a child, £2,500 to a grandchild or great-grandchild, and £1,000 to another person. Regular gifts from surplus income can qualify if affordable after usual living costs; keep evidence of income and payments.

5. Know how the seven-year rule and taper relief work

Many outright gifts to individuals are potentially exempt transfers. If the giver survives seven years, they are usually outside the estate, subject to exceptions such as keeping a benefit. If death happens sooner, tax may arise. Taper relief may reduce tax on some gifts made more than three years before death, but does not reduce the gift’s value and does not always apply. Keep a dated record and source for each gift.

6. Do not give an asset away while continuing to benefit from it

Giving a home to someone else but continuing to live there without paying a proper market rent can be a gift with reservation of benefit. The home may still be treated as part of the giver’s estate for inheritance tax. A later change in health can also raise separate questions about care assessments. Inheritance tax rules and care-fee deprivation tests are not the same; a transfer that appears effective for one purpose may have a different result under the other system.

7. Check authority, nation and records before acting

An attorney cannot make unrestricted gifts from another person’s money. The attorney’s powers are limited, and larger or unusual gifts may need Court of Protection authority in England and Wales. Keep a gift log with date, value, recipient, reason, source of funds and any supporting statement. Inheritance tax is UK-wide, but Scottish succession law includes legal rights for a spouse or civil partner and children over part of the moveable estate. Ask for advice that covers both tax and the relevant nation’s succession law.

Evidence and questions

Common questions

How much can I give away each year without Inheritance Tax?

For 2026–27, the annual exemption is £3,000 in total, and small gifts of up to £250 per person may qualify if another allowance is not used for that recipient. Gifts from surplus income can have a separate exemption if they are regular and affordable after normal living costs. These rules do not decide care-fee assessments, which use a different test.

Does the seven-year rule mean no tax is due on a gift?

Many outright gifts to individuals are usually outside the estate if the giver survives seven years, but there are exceptions. A gift where the giver continues to benefit, such as giving away a house but continuing to live in it rent-free, may still be included. If death occurs sooner, gifts can use the nil-rate band and may lead to tax. Keep complete records.

Can my spouse’s unused Inheritance Tax allowance be transferred?

An unused proportion of a deceased spouse or civil partner’s nil-rate band can generally be claimed by the survivor’s estate. The residence nil-rate band may also be transferable if its conditions are met. The personal representatives need evidence about the first estate and the home. The maximum depends on circumstances, so keep the earlier estate and probate documents.

Do Inheritance Tax gifting rules protect money from care fees?

No. Inheritance tax and care financial assessments are separate systems with different tests. Care authorities may ask about the purpose and timing of transfers, and whether care needs or charges were foreseeable. There is no seven-year care-fee safe period. Read deprivation of assets and care fees before relying on a gift as part of a care plan.

Can an attorney make gifts from someone else’s money?

An attorney’s authority is limited. The Office of the Public Guardian says gifts are normally restricted to customary occasions and must be reasonable in light of the person’s circumstances and estate; a substantial or unusual gift may require Court of Protection authority. The donor’s money is not the attorney’s money. Keep records and obtain legal advice before acting.

What is taper relief?

Taper relief reduces the tax rate on a taxable gift made between three and seven years before the giver dies. It does not reduce the value of the gift or restore the tax-free allowance it uses. GOV.UK says it applies only when total gifts in that period exceed the £325,000 tax-free threshold. Keep gift dates, amounts and recipients recorded, and seek free independent guidance from MoneyHelper before relying on the rule.

Who pays inheritance tax on gifts?

GOV.UK says inheritance tax due on gifts is usually paid by the estate. Where gifts exceed £325,000 in the seven years before death, recipients can have to pay tax on gifts above the tax-free threshold. Exemptions, gift dates and continuing benefits affect the calculation, so retain the paperwork and ask the estate’s representative to explain it. Get free independent guidance from MoneyHelper and specialist tax advice for an individual liability.

Before you act

Write down the outcome you want, the names and dates involved, and the evidence or documents you already have. Ask for important decisions, costs and next steps in writing. If information is unclear, ask which nation’s rules are being used and when the decision will be reviewed.

If there is a delay or disagreement

Keep a short factual record of calls, letters and missed actions. Ask for the responsible person, the written reasons, the complaints or review route and any deadline. Immediate health or safety risks should be escalated separately rather than waiting for a routine complaint.

Differences across the UK

Inheritance tax is a UK tax, but the legal rules governing wills and succession are not identical across the UK. Scotland has its own succession law: a spouse, civil partner or children may have legal rights in the moveable estate, even where a will says something different. England, Wales and Northern Ireland have different succession frameworks. Tax allowances and HMRC rules apply UK-wide, but the person’s domicile, asset type, trust arrangements and the law governing the estate can matter. Ask a solicitor or tax adviser familiar with the relevant nation to review the whole plan.

Primary sources

The publisher checked this guide against the 9 official sources below. This is an editorial source check, not approval by a clinician, lawyer or benefits adviser.

Editorial note: By Does Your Duck Quack.