Chapter: 2 - Inheritance Tax Mitigation: The Basics

The £250 small gifts exemption

2.2.5

A gift of up to £250 (but no more) to any individual in a tax year is exempt (IHTA 1984 s20).  Note that this exemption cannot be used in conjunction with the £3,000 annual exemption (IHTM 14180).  So a gift of £3,250 to a particular individual, in circumstances where the previous year’s annual exemption has been used and so cannot be carried forward (but with no other transfers of value in that tax year), will be covered by the annual exemption as to £3,000 and, as to £250, if not within the normal expenditure out of income exemption, will be a PET.

TAX TIP: Consider the advantages of occasional or even annual £250 gifts to (say) God-children made during one’s lifetime rather than by Will – and the donor might even get the bonus of a thank you letter.