Industry News - 30th September 2026
Financial help from a family member can make a real difference, whether it is helping with a house deposit, covering living costs or putting money aside for a child.
But does the person receiving the money need to pay tax on it?
💵 Is a cash gift taxable?
In most cases, you will not need to pay Income Tax simply because a family member has given you money as a genuine gift.
However, although the recipient usually has no immediate tax bill, the gift could have Inheritance Tax implications for the giver.
📅 How does the seven-year rule work?
If the person making the gift lives for at least seven years after giving it, the gift will normally fall outside their estate for Inheritance Tax purposes.
If they die within seven years, you may need to consider the gift when calculating Inheritance Tax. This does not automatically mean tax will be payable; it will depend on factors including:
✅The value of the gift.
✅The date the person gave it.
✅Any exemptions available.
✅Other gifts made during the seven years.
✅The overall value of the estate.
🏠 What is the Inheritance Tax threshold?
The standard Inheritance Tax threshold, known as the nil-rate band, is currently £325,000. Lifetime gifts made within seven years of death can use some or all of this threshold before it is applied to the remaining estate.
If you leave your home to your children or grandchildren, your estate may benefit from a further tax-free allowance of up to £175,000. Added to the standard £325,000 threshold, this means you may be able to pass on up to £500,000 before Inheritance Tax is due.
This allowance is not automatic, and the amount available will depend on the value of the home and the overall estate.
However, the residence nil-rate band applies to a qualifying home passed on after death. It does not apply to lifetime gifts made during the seven years before death.
Married couples and civil partners can usually pass any unused allowance to one another. If one partner passes and leaves their entire estate to the other, their allowances may remain available because transfers between spouses or civil partners are normally exempt from Inheritance Tax. When the second partner dies, their estate could then have tax-free allowances totalling up to £1 million, as long as the qualifying home passes to children or grandchildren and the other conditions are met.
🎁 What counts as a gift?
A gift can include:
✅ Money.
✅ Property or land.
✅ Shares.
✅ Personal possessions.
✅ A loss in value when you sell an asset to a family member for less than its market value.
For example, if a property worth £250,000 is sold to a family member for £200,000, the £50,000 difference could be treated as a gift.
🎉 What can you give tax-free?
Several exemptions allow gifts to be made without being added to the value of the giver’s estate.
🧾 The annual exemption
Each person can give away up to £3,000 during a tax year using their annual exemption. You can give this to one person or split it between several people.
You can usually carry forward any unused annual exemption for one tax year only.
💝 Small gifts
You can make gifts of up to £250 per person to as many people as you wish during the tax year, provided you have not used another exemption for the same person.
💒 Wedding and civil partnership gifts
Tax-free gifts can also be made for a wedding or civil partnership, up to:
✅ £5,000 when given to a child
✅ £2,500 when given to a grandchild or great-grandchild or
✅ £1,000 when given to anyone else.
🔄 Regular gifts from income
Regular financial support may be exempt if it is made from the giver’s normal income and they can still maintain their usual standard of living.
Examples could include:
✅ Helping a child with rent.
✅ Supporting an elderly relative.
✅ Making regular payments into a savings account for a child under 18.
There is no fixed monetary limit for this exemption, but the gifts must meet HMRC’s conditions, and you should keep good records.
⚠️ Don’t forget about income earned afterwards.
Although the original cash gift is not normally subject to Income Tax, any income it later produces may be taxable.
For example, the recipient may need to pay tax on savings interest, dividends or rental income generated using the gifted money or assets.
🗃️ Keep clear records
Anyone making significant gifts should keep a record of:
✅ What was given.
✅ Who received it.
✅ The value of the gift.
✅ The date the person gave it.
✅ Which exemption, if any, was being used.
These records can make it much easier to deal with the estate and establish whether any Inheritance Tax is due in the future.
💡 Perrigo Perspective
Giving money to family can be a great way to provide support when it is needed most, but it is important to look beyond the immediate gift.
The amount, timing and frequency of gifts can all affect the Inheritance Tax position. Our advice is to plan ahead, understand which exemptions may apply and keep clear records rather than leaving family members to piece everything together later.
For larger gifts particularly those involving property, shares or regular financial support, it is worth seeking advice before transferring anything. A little planning now could help you use the available exemptions effectively and avoid unnecessary complications in the future.
📞 Planning to give a significant gift?
The rules around gifts and Inheritance Tax can become complicated, particularly when large amounts, property, or regular payments are involved.
If you are considering a substantial gift or have already received one and want help understanding the potential tax implications, contact the Perrigo Consultants team on 01299 488860 or book a FREE discovery call below.
Internet link: You can also check the latest guidance on How Inheritance Tax works: thresholds, rules and allowances on GOV.UK
