How Much Money Can Be Legally Given to a Family Member as a Gift in the UK?

Giving money as a gift to family members is a common and heartfelt way to support loved ones. Whether it’s to help your children with a house deposit, assist grandchildren with education costs, or simply share your wealth, many people want to know: how much money can be legally given to a family member as a gift UK?

While there is no legal limit on the amount you can gift, it’s crucial to understand the rules surrounding taxation, record-keeping, and potential impacts on benefits. Without this knowledge, your generous gift could result in unexpected tax bills or complications.

This in-depth guide explores everything UK residents need to know about gifting money legally, tax implications, exemptions, and best practices to ensure your gifts are both generous and financially sound.

Is There a Legal Limit on Money Gifts in the UK?

No. There is no legal cap on how much money you can give as a gift to family members or anyone else.

You can gift £500, £50,000, or even more if you wish. The UK legal system places no upper boundary on gifting cash during your lifetime. However, this doesn’t mean there are no financial or tax consequences when gifting large sums.

What are the Inheritance Tax and Gift Rules?

What Is a Potentially Exempt Transfer (PET)?

In the UK, when you gift money or assets, it is treated as a Potentially Exempt Transfer (PET) for Inheritance Tax (IHT) purposes. This means:

• If you survive seven years or more after making the gift, it becomes exempt from IHT and is effectively outside your estate.
• If you die within seven years of making the gift, the gift’s value is added back to your estate when calculating IHT, which can increase the tax payable by your heirs.

The Seven-Year Rule and Taper Relief

If you pass away within seven years, taper relief may reduce the IHT payable on the gift depending on how many years have passed since the gift was made:

Years since gift	Taper relief rate on IHT due (%)
Less than 3 years	100% (full IHT payable)
3 to 4 years	80%
4 to 5 years	60%
5 to 6 years	40%
6 to 7 years	20%
More than 7 years	0% (no IHT payable)

The £3,000 Annual Gift Exemption

Each individual has an annual exemption allowing gifts of up to £3,000 per tax year free of IHT. If you don’t use this exemption in one year, you can carry it forward once, meaning you could gift up to £6,000 tax-free in one tax year by using two years’ worth of exemptions.

For example, if you gave no gifts in 2023/24, you could gift £6,000 in 2024/25 without it affecting IHT.

Small Gifts Allowance: £250 Per Person

Additionally, you can give small gifts of up to £250 per recipient each tax year without impacting your IHT exemption. However, this small gift exemption cannot be combined with the £3,000 annual exemption on the same person in the same tax year.

Gifts on Special Occasions: Weddings and Civil Partnerships

The law allows for exemptions on gifts made to celebrate weddings or civil partnerships, with limits depending on your relationship to the recipient:

• Up to £5,000 if you are the parent of the bride or groom
• Up to £2,500 if you are a grandparent or great-grandparent
• Up to £1,000 from anyone else

These gifts are exempt from IHT if within the stated limits.

Are Regular Gifts from Surplus Income an Important Exemption?

One important way to gift money without triggering IHT is through regular gifts made from your surplus income — money left after covering normal living expenses.

If these gifts are consistent and don’t affect your lifestyle, they are exempt from IHT. For example, monthly payments towards grandchildren’s education fees or regular financial support for adult children may qualify.

Providing Surplus Income Gifts

It’s vital to keep meticulous financial records showing:

• Your total income and expenditure
• The amount and frequency of gifts made
• Evidence that the gifts do not reduce your standard of living

Without this proof, HM Revenue & Customs (HMRC) may reject the exemption claim.

What Additional Taxes Should You Consider When Giving Gifts?

Capital Gains Tax (CGT)

While gifting cash doesn’t trigger CGT, gifting assets such as shares, property, or valuables might. Capital Gains Tax (CGT) is charged on the increase in value of the asset from when you acquired it to when you gifted it.

If you gift an asset to a family member, it’s treated as if you sold it at market value, so you may have to pay CGT on any gain.

Stamp Duty Land Tax (SDLT)

If you gift property, the recipient may be liable to pay Stamp Duty Land Tax (SDLT), especially if they take on any outstanding mortgage.

How does Gifting Money Affect Means-Tested Benefits?

Gifting large amounts of money can impact eligibility for means-tested benefits such as Universal Credit, Pension Credit, or Housing Benefit. This is because the government may consider the gifted money as still available to you (deprivation of capital).

This can lead to a reduction or loss of benefits. If you or the recipient rely on benefits, seek advice before making large gifts.

What Are Practical Tips for Gifting Money to Family Members?

1. Put the Gift in Writing

Create a gift letter that states:

• The amount given
• The date of the gift
• That it is a gift (not a loan or advance on inheritance)

This helps clarify intentions if questioned later.

2. Use Traceable Payment Methods

Avoid gifting cash, especially large amounts. Instead, use bank transfers or cheques to create a clear paper trail.

3. Plan Gifts Over Multiple Years

Spread large gifts over several years to take advantage of the £3,000 annual exemption repeatedly, reducing tax risks.

4. Keep Detailed Records of Income-Based Gifts

If you gift regularly from your income, maintain detailed financial records to prove the gifts qualify for the surplus income exemption.

5. Get Professional Advice for Large or Complex Gifts

Consult a solicitor or tax adviser experienced in estate planning to structure gifts tax-efficiently and avoid unintended tax consequences.

Real-Life Examples of Gift Scenarios

Scenario 1: Helping a Child Buy a Home

Sarah wants to gift her son £50,000 to help with a house deposit. She has never used her £3,000 annual exemption before. She can:

• Use the £3,000 exemption this tax year
• The remaining £47,000 is a PET and will be exempt if Sarah survives 7 years
• If Sarah passes away within 7 years, the gift may increase her estate’s IHT liability

Scenario 2: Regular Gifts from Surplus Income

John pays his granddaughter £300 monthly for school fees from his pension income. He keeps records showing this is surplus income and does not affect his living standard. These gifts are exempt from IHT.

Summary: Key Points to Remember

• No legal cap on the amount you can gift.
• Use £3,000 annual exemption and £250 small gift exemption to reduce IHT risk.
• Gifts are Potentially Exempt Transfers subject to the 7-year survival rule.
• Regular gifts from surplus income are exempt if documented.
• Gifting may affect means-tested benefits.
• Proper documentation and advice are critical, especially for large gifts.

Final Thoughts

Gifting money to family members is a meaningful way to provide support and share your wealth. Understanding the legal and tax landscape surrounding gifts in the UK empowers you to do so wisely, avoiding surprises and making the most of available exemptions.

Planning, record-keeping, and expert advice are key to ensuring your gifts benefit your family and preserve your financial security.

LocalBusinessNews.co.uk is committed to providing clear, practical advice on important financial topics to help you make informed decisions. Bookmark this guide and visit often for more useful articles tailored to UK readers.

Frequently Asked Questions

Can I gift money to my spouse without tax?
Yes, gifts between spouses or civil partners living together are exempt from IHT.

Can I gift money to my children without paying tax immediately?
Yes, but if you die within 7 years, the gift may be subject to IHT.

What if I gift money and then need it back?
Once a gift is made, it’s generally irrevocable unless agreed otherwise. If repayment is expected, it’s better classified as a loan.

How do gifts affect benefits?
Large gifts can reduce means-tested benefits eligibility. Always seek advice before gifting if you or the recipient claim benefits.