Regular gifts from income: free of inheritance tax
Updated 9 October 2026. Figures checked against official sources on 9 October 2026.
Regular gifts paid out of your income are free of inheritance tax straight away. No 7-year wait, and no upper limit.
Worked example: someone aged 66 with a £26,000 final salary pension and the state pension, spending £28,000 a year, giving £400 a month to family from 67. By 85 they've given £86,400, and inheritance tax is £34,560 lower.
Worked example
Your money lasts to 95, with £254,966 left.
- Age now
- 66
- Retire at
- 66
- Pots
- £160,000
- Take-home wanted
- £28,000 a year
- Plan until
- 95
The three conditions
- The gifts are regular: part of your normal spending.
- They come from income, not savings.
- After the gifts, you can still keep your usual standard of living.
Your executors claim it after you die, on form IHT403. It asks for your income and spending each year, so a record of both helps them.
What counts as income
| Counts | Doesn't count |
|---|---|
| Pensions and the state pension | Savings and ISA withdrawals |
| Annuities | Selling investments or property |
| Interest and dividends paid out | Tax-free cash from a pension (not confirmed by HMRC, so the calculator leaves it out) |
| Rent |
Other gifts free of inheritance tax
| Gift | Limit |
|---|---|
| Any gifts | £3,000 a year, plus last year's if unused |
| Small gifts | £250 a person a year |
| Wedding gifts | £5,000 to a child, £2,500 to a grandchild, £1,000 to anyone else |
| To a husband, wife or civil partner | No limit |
| To charity | No limit |
Everything else: the 7-year rule
| Years between gift and death | Tax on the gift |
|---|---|
| Under 3 | 40% |
| 3 to 4 | 32% |
| 4 to 5 | 24% |
| 5 to 6 | 16% |
| 6 to 7 | 8% |
| 7 or more | None |
Tax is only due on gifts above the £325,000 tax-free band. Recent gifts use the band up first, which leaves less of it for the estate.
Gifts and care fees
The 7-year rule is for inheritance tax only. Councils can count money given away to avoid care fees, with no time limit.
Questions people ask
Can I give money from my pension every month free of inheritance tax?
Yes, if the gifts are regular, come from income, and leave you able to keep your usual standard of living. Pension income counts as income. HMRC hasn't confirmed whether the tax-free part of a pension withdrawal counts.
Is there a limit on gifts from income?
No. Any amount can be free of inheritance tax if all three conditions are met.
Who proves the gifts came from income?
Your executors, after you die, on form IHT403. It has a table of income and spending for each year, so records of both make it easier.
What happens to a gift if I die within 7 years?
It counts towards your estate's £325,000 tax-free band first. Tax on any part above the band falls from 40% to 8% the longer you live after the gift.
Sources
Rates and rules were checked against these on 9 October 2026. Worked-example figures come from the calculator, using 2026/27 tax rules.