Gifts to family: why keeping a record matters

December is a time when many people give generously to family, whether that’s presents, help with a deposit or help with education costs. Most gifts never raise a tax question. But some can matter for Inheritance Tax for years after they’re made.

The people who usually have to deal with this are your executors, after your death. A simple record of what you gave, to whom and when makes their job much easier.

Update, October 2026: three things have changed since this article was published. First, the business and agricultural property relief changes became law in Finance Act 2026 and apply from 6 April 2026. Full relief now applies only up to a combined allowance, with relief at a lower rate above it. Gifts of such property made on or after 30 October 2024 can also be affected if the giver dies within 7 years and on or after 6 April 2026 (GOV.UK: Changes to agricultural property relief and business property relief). Second, most unused pension funds and pension death benefits will count towards an estate for deaths on or after 6 April 2027 (GOV.UK: Inheritance Tax: unused pension funds and death benefits). Third, since 6 April 2025, Inheritance Tax has been based on long-term UK residence rather than domicile. This can limit the exemption for gifts between spouses or civil partners where one of you isn’t a long-term UK resident (GOV.UK: Inheritance Tax if you’re a long-term UK resident). The gift rules and exemptions described below haven’t changed.

How gifts and Inheritance Tax connect

Inheritance Tax may have to be paid after your death on some gifts you gave during your lifetime. Gifts given less than 7 years before you die may be taxed, depending on who received them, their value and when they were given. GOV.UK explains the rules on giving gifts.

If you live for 7 years after making a gift, there’s usually no Inheritance Tax to pay on it, although gifts into most trusts follow different rules. If you die within 7 years and Inheritance Tax is due on the gift itself, the tax may be reduced on a sliding scale, known as taper relief, for gifts made between 3 and 7 years before your death.

A gift isn’t only money. It can include household and personal goods, property, land and shares. Selling something to a family member for less than it’s worth can also count as a gift of the difference.

Gifts that are exempt

Some gifts are exempt from Inheritance Tax whenever they’re made. These include gifts between spouses or civil partners who live in the UK permanently, and gifts to charities. There are also allowances each tax year, for example for small gifts and for wedding or civil partnership gifts, and an annual exemption.

Regular gifts made out of your income can also be exempt, as long as they’re part of your normal spending and you can still keep up your usual standard of living afterwards. This exemption depends heavily on records, because your executors will need to show that the gifts came from income and not from capital.

Gifts you still benefit from

If you give something away but keep using it or benefiting from it, it’s known as a ‘gift with reservation’, and it still counts towards the value of your estate. GOV.UK’s examples include giving your home to a relative but carrying on living there, and giving away a valuable painting but still displaying it in your house.

Why your executors need a record

When someone dies, their executors must work out whether Inheritance Tax is due on the estate. As part of that, they need to identify gifts made in the years before death. Without a record, that can mean searching through years of bank statements and asking family members to remember what they received and when.

A clear record helps them show which gifts were exempt, which fall outside the 7-year period and which need to be included. It can avoid delays, mistakes and difficult conversations at an already hard time.

What to record

• the date of the gift;
• who received it and their relationship to you;
• what it was, for example cash, shares or property;
• its value at the time, and how you worked that out;
• whether you consider it exempt, and why;
• for regular gifts from income, a note of your income and spending each year, to show the gifts came from surplus income.

Keep the record somewhere safe, and tell your executors where it is. Keeping it with your will is a sensible option.

Gifts of property and shares

Giving away an asset, such as shares or a second property, can have Capital Gains Tax consequences as well as Inheritance Tax ones. A gift to someone other than your spouse or civil partner is generally treated as a disposal at market value, so tax may be due even though you received nothing. GOV.UK has more on Capital Gains Tax and gifts.

If you’re thinking of making a larger gift, especially of property or business assets, take advice first. The way a gift is made can affect both taxes.

The Budget on 30 October 2024 announced changes from April 2026 to the Inheritance Tax reliefs for business and agricultural property, and that most unused pension funds and pension death benefits would count towards an estate from April 2027. At the time of writing, these are proposals and not yet law.

Sources

Our main sources are HMRC and GOV.UK:

• How Inheritance Tax works: rules on giving gifts
• Capital Gains Tax: gifts
• Changes to agricultural property relief and business property relief
• Inheritance Tax: unused pension funds and death benefits
• Inheritance Tax if you’re a long-term UK resident

Talk to us about gifts and Inheritance Tax

If you’re planning gifts to family, we can help you understand how they might be treated for Inheritance Tax and Capital Gains Tax, and set up a simple record for your executors. Call us on 020 7164 0225, send us a WhatsApp message or email your tax question to hello@ibandco.co.uk.

You can also read about our Inheritance Tax planning service.

First published 10 December 2024. Tax content checked on 9 October 2026. This article reflects the rules at the date it was first published. Where something has changed since, we’ve added an update note. Rules and rates change, so please check with us before acting.

Please note: this article is general information based on our understanding of UK tax rules at the date shown above. It is not advice for your circumstances, and tax rules and rates can change. Please speak to us before acting on it.