In the 2026/27 tax year you can give away £3,000 in total without it counting toward Inheritance Tax, plus £250 each to as many separate people as you like, plus wedding gifts of £5,000 to a child, £2,500 to a grandchild or great-grandchild and £1,000 to anyone else. Gifts between spouses or civil partners are unlimited. And regular gifts made out of surplus income have no cap at all, which is the allowance that matters most and is the one people miss. All figures from gov.uk's rules on giving gifts. Correct as at 20 August 2026.
The tax free gift allowances for 2026/27
| Allowance | Amount | How it works |
|---|---|---|
| Annual exemption | £3,000 per tax year | A total, not per person. Can be split. Carries forward one tax year only |
| Small gifts | £250 per recipient, per tax year | Unlimited number of recipients, but not to anyone you have used another exemption on |
| Wedding gift to a child | £5,000 | Can be combined with the annual exemption |
| Wedding gift to a grandchild or great-grandchild | £2,500 | Can be combined with the annual exemption |
| Wedding gift to anyone else | £1,000 | Can be combined with the annual exemption |
| Spouse or civil partner | Unlimited | Where both are long-term UK resident. If the receiving spouse is not, the exemption is restricted |
| Normal expenditure out of income | No cap | Must be regular, paid from income, and leave your standard of living intact |
Anything given beyond these allowances is not automatically taxed. It becomes a potentially exempt transfer, which drops out of your estate if you live another 7 years. That is a separate mechanism, covered in our guide to the 7 year rule.
The £3,000 annual exemption is smaller than it looks
It is a single yearly total across everyone you give to, not £3,000 per child. A couple who each want to give each of their three children £3,000 are moving £18,000. Their two annual exemptions cover £6,000 of it, and the remaining £12,000 sits outside the exemption.
Two features are worth knowing. First, each spouse or civil partner has their own £3,000, so a couple can give £6,000 a year between them. Second, if you did not use last year's exemption you can carry it forward, but for one tax year only, and you must use the current year's allowance first. A couple who used neither last year nor this can therefore move £12,000 in one go, and then the carried-forward capacity is gone.
The £250 rule has a trap in it
You can give £250 to any number of different people each tax year, free of Inheritance Tax. There is no limit on how many recipients.
The trap is that the small gifts exemption is the only one that will not stack. Gov.uk's gifts guidance is explicit: you can give £250 to a person only "as long as you have not used another allowance on the same person". Give a child £3,000 under the annual exemption and you cannot add a £250 small gift on top.
Every other allowance does combine. Gov.uk's own example is a wedding gift of £5,000 to a child alongside £3,000 of annual exemption to the same child in the same tax year. The £250 rule is the exception, not the pattern.
Normal expenditure out of income: the allowance with no ceiling
This is the exemption that does the real work, and the one most articles mention in a single line and move on from. A gift is exempt immediately, with no 7 year wait and no upper limit, if it meets three conditions: it forms part of a regular pattern of giving, it is made out of income rather than capital, and you are left with enough income to maintain your usual standard of living.
All three must hold. Income means income rather than capital: pensions, employment, dividends, rent or interest. Selling investments to fund a gift is capital, however regular the payments are.
What makes or breaks a claim is evidence. Your executors will have to satisfy HMRC after your death, when you are not available to explain the pattern. In practice that means a simple annual record of income in, normal living costs out, and the gifts made from the surplus. A schedule kept contemporaneously is worth far more than a reconstruction attempted years later.
Example: two approaches to the same £30,000
Example. A retired couple want to help a daughter with £30,000 toward a deposit. Their pensions and investment income leave them roughly £2,600 a month more than they spend.
Approach one: they write a single cheque for £30,000. Their two annual exemptions cover £6,000 of it. The remaining £24,000 is a potentially exempt transfer, and it stays in play against their estates for 7 years.
Approach two: they set up a standing order of £1,250 a month each, documented as gifts from surplus income, and pay the £30,000 across a year. If the pattern and the income position hold, the whole amount is exempt as it is paid, with no 7 year exposure at all, and their £6,000 of annual exemptions is still free for other giving.
Same money, same daughter, materially different Inheritance Tax position. The difference is structure and record keeping, not cleverness.
What to do now
Use the annual exemption every year rather than in bursts. It does not accumulate beyond a single year, so an unused exemption is simply lost.
If you give regularly, work out whether those gifts are coming from surplus income rather than capital, and start the record now. That is the difference between an exemption you can prove and one your executors will argue about.
Before making a gift large enough to exceed the allowances, check your running total of gifts over the past 7 years, because the order in which gifts are set against the £325,000 nil-rate band (2026/27) determines what any tax would be. You can model the estate side with our Inheritance Tax calculator, and our inheritance tax planning page sets out the wider picture. Where a gift is part of a plan for who inherits what, it usually belongs alongside your will, which we prepare with the Inheritance Tax position in mind.
Frequently Asked Questions
£3,000 across all your giving in the tax year, plus £5,000 if it is a wedding gift, and unlimited amounts from surplus income if the gifts are regular and your standard of living is unaffected. Anything above the allowances is a potentially exempt transfer and leaves your estate if you survive 7 years.
Yes. The annual exemption belongs to each individual, so a couple can give £6,000 a year between them, or £12,000 if neither used the previous year's exemption and both carry it forward.
Not for an outright gift to another person. Those are reported by your executors after your death, which is why keeping a record as you go matters. Gifts into most trusts are different and can have to be reported to HMRC at the time, so take advice before settling anything into trust.
For one tax year only, and the current year's allowance is used first. Anything older than that is lost, so a long run of unused exemptions cannot be banked up.
Only for wedding gifts, where the limit is £2,500 for a grandchild or great-grandchild against £5,000 for a child. The annual exemption, the £250 small gifts rule and the surplus income exemption all apply to grandchildren on the same terms as anyone else.
Talk to us about your giving
If you are giving regularly, or planning something large enough to go past the allowances, speak to Chloe Symmonds, Senior Manager. The first conversation looks at what you can give from income, what the exemptions already cover, and what a larger gift would mean for your estate. Call 020 8554 2135 or email info@visionconsulting.co.uk, or use our contact page.
By the Vision Consulting team.
This is general information, not advice. Your position depends on your circumstances. Speak to us before acting on anything here.