{"id":228224,"date":"2025-07-01T03:11:14","date_gmt":"2025-07-01T03:11:14","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/228224\/"},"modified":"2025-07-01T03:11:14","modified_gmt":"2025-07-01T03:11:14","slug":"hmrc-inheritance-tax-rules-warning-for-anyone-giving-gifts-to-family-and-friends","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/228224\/","title":{"rendered":"HMRC inheritance tax rules warning for anyone giving gifts to family and friends"},"content":{"rendered":"

An expert says too many people are caught out by the misunderstanding that all gifts fall outside of inheritance tax\"AA warning has been issued over inheritance tax rules(Image: Getty Images\/E+)<\/p>\n

People in the UK are being warned to tread carefully when gifting money to loved ones or risk leaving their estates facing unexpected inheritance tax (IHT) bills. While many believe that giving money to family or friends is tax-free, the rules are more complex than they appear.<\/p>\n

According to HMRC<\/a>, only certain types of gifts are immediately exempt from IHT. And failing to follow the correct process could mean those gifts are still liable for tax after you die.<\/p>\n

Andy Wood, a tax expert at Tax Natives,<\/a> says too many people are caught out by the misunderstanding that all gifts fall outside of inheritance tax. \u201cThere\u2019s a common misconception that all gifts are automatically exempt from inheritance tax \u2013 but the reality is far more nuanced,\u201d he explained.<\/p>\n

\u201cHMRC is clear – unless you follow the specific rules around surplus income<\/a>, your generosity could come back to bite your estate later on.\u201d One of the most effective ways to gift money without inheritance tax consequences is through HMRC\u2019s \u201cgifting out of surplus income\u201d exemption. This allows individuals to give away unlimited amounts \u2013 but only if the gifts are made regularly, come from income (not savings or assets), and do not affect the donor\u2019s standard of living.<\/p>\n

\u201cGifts made from surplus income can be a powerful tool for inheritance tax planning,\u201d says Andy, \u201cbut the key is evidence. You must be able to prove that the gifts are both regular and sustainable, and that they don’t compromise your standard of living.\u201d<\/p>\n

Experts recommend that anyone using this exemption keep detailed records of every gift, including the source of the funds and how often they are made. Andy warned: \u201cPeople often overlook the need for proper record-keeping.<\/p>\n

\u201cIf you\u2019re gifting regularly to loved ones, it\u2019s vital to document not only the amount and frequency, but also to show that the funds came from income \u2013 not capital. Without this, you risk the gifts being challenged by HMRC.\u201d<\/p>\n

For those making larger, one-off gifts \u2013 which fall outside the surplus income exemption \u2013 these are classed as Potentially Exempt Transfers (PETs). These gifts will only be fully exempt from inheritance tax if the giver survives for seven years after making the gift.<\/p>\n

\u201cFor larger estates, gifting from surplus income can help reduce the inheritance tax bill significantly,\u201d says Andy. \u201cHowever, one-off gifts or those made without a clear pattern will fall under different rules \u2013 and could be taxable if you don\u2019t survive seven years.\u201d<\/p>\n

With inheritance tax thresholds frozen and property values remaining high across much of the UK, more families are being caught in the IHT net \u2013 even when making well-intentioned financial gifts. \u201cI\u2019d strongly advise anyone considering substantial gifts to seek professional advice,\u201d Andy added. \u201cInheritance tax rules are complex, and the cost of getting it wrong can be high \u2013 both financially and emotionally.\u201d<\/p>\n

We have a dedicated newsletter for ChronicleLive\u2019s money-saving and cost of living stories. It\u2019s free and you can sign up to receive it here<\/strong><\/a>. <\/strong>It will keep you up to date with all the latest money news and budgeting tips as well as stories on the cost of living crisis in our region.<\/p>\n","protected":false},"excerpt":{"rendered":"An expert says too many people are caught out by the misunderstanding that all gifts fall outside of…\n","protected":false},"author":2,"featured_media":228225,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3093],"tags":[51,474,1016,2499,16,15,961],"class_list":{"0":"post-228224","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-finance","10":"tag-hmrc","11":"tag-personal-finance","12":"tag-uk","13":"tag-united-kingdom","14":"tag-your-money"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/114775790991544981","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/228224","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=228224"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/228224\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/228225"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=228224"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=228224"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=228224"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}