Christmas Giving & Inheritance Tax: How to Gift to Loved Ones Without the Tax Risk
The festive season is a time for generosity, and many people view Christmas as an opportunity to pass wealth to family and loved ones. However, without careful planning, well-intentioned gifts can unintentionally fall within the scope of Inheritance Tax (IHT).
At Surrey Hills Tax, we assist our clients in ensuring their giving is both meaningful and tax-efficient - not just at Christmas, but throughout the year. Below, we outline the key IHT exemptions and reliefs everyone should be aware of.
🎁 Annual Exemption - £3,000 per Tax Year
You can gift up to £3,000 each tax year without it being part of your estate for IHT purposes. If you didn't make use of this allowance last year, you can carry forward the unused amount once, potentially giving up to £6,000 tax-free this year.
🎁 Small Gifts Exemption - £250 per Recipient
You may give up to £250 per individual, per tax year, completely tax-free, provided they don’t also receive part of your £3,000 annual exemption.
This makes small Christmas gifts a perfect way to reduce your estate without triggering IHT concerns.
🏁 Nil Rate Band - £325,000 (Resets Every 7 Years)
Each individual has a £325,000 nil rate band. Gifts exceeding this amount may attract IHT if the donor dies within seven years. After seven years, such gifts fall outside the estate entirely.
🎗️ Gifts to Charity
Gifts to UK-registered charities are fully exempt from IHT. Additionally, if you are a higher- or additional-rate taxpayer, you may also benefit from income tax relief on charitable donations.
💍 Gifts Between Spouses or Civil Partners
Gifts between spouses or civil partners are completely exempt from IHT, provided both partners are UK-domiciled. This can be a highly effective tool in estate equalisation and long-term planning.
🌟 Giving Isn’t Just for Christmas
While Christmas is a popular time to gift, IHT planning is an all-year strategy. Several powerful additional exemptions and reliefs can significantly reduce long-term IHT
1️⃣ Gifts Out of Normal (Surplus) Income
One of the most valuable, but often overlooked, IHT reliefs.
These gifts are fully exempt if:
They come from surplus income, not capital
They form a regular pattern, such as monthly transfers, annual gifts, or school fee payments
They do not reduce your standard of living
For those with consistent excess income, this can be one of the most powerful estate-planning tools available.
💒 Wedding or Civil Partnership Gifts
You can make tax-free gifts on the occasion of a wedding or civil partnership of up to:
£5,000 to a child
£2,500 to a grandchild or great-grandchild
£1,000 to anyone else
These allowances are per person, per marriage.
🏢 Business Property Relief (BPR)
(Important rule changes coming from 6 April 2026)
Currently, BPR offers up to 100% relief on qualifying business assets, including:
Unlisted trading company shares
Certain business property
AIM-listed shares
This relief is extremely valuable for succession planning involving family businesses.
However, from 6 April 2026:
AIM-listed shares will no longer qualify for 100% BPR, instead, the relief will be reduced to 50%
BPR will be subject to a cap of £1m (combined with APR) at 100% relief, resetting every 7 years, with 50% relief thereafter
Planning ahead before these changes take effect is essential.
🌾 Agricultural Property Relief (APR)
(Also changing from 6 April 2026)
Currently, APR offers up to 100% relief on qualifying agricultural property and land.
From 6 April 2026:
APR will also be capped at £1 million (combined with BPR) for 100% relief, with the allowance resetting every seven years. Any value above this limit will only qualify for 50% relief.
Anyone who owns agricultural land or operates a farming business should review their long-term plans in light of these upcoming changes
💡 Plan Ahead for Peace of Mind
Inheritance Tax can be complex, and rule changes planned for 2026 make forward planning even more important. At Surrey Hills Tax, we specialise in helping clients:
✔ Distribute wealth efficiently
✔ Make the most of available exemptions
✔ Reduce long-term IHT exposure
✔ Structure gifts to loved ones safely and effectively
Whether you’re planning Christmas gifts or reviewing your long-term estate strategy, we’re here to guide you every step of the way.
Contact Us | Expert Tax Advisors in Surrey
Get in touch:
📧 hello@surreyhillstax.co.uk
📞 01483 970 410