Short answer
You can gift money to your children tax-free in several ways: £3,000 a year under the annual exemption (plus any unused amount from the previous year), small gifts of up to £250 per person, wedding gifts, and regular gifts from surplus income with no limit. Larger gifts above these allowances only become fully tax-free if you survive seven years after making them — this is the 'seven-year rule'.
Gifts that are tax-free straight away
Annual exemption: £3,000 of gifts in total each tax year, and you can carry forward one unused previous year, giving a possible £6,000 in a single year if you didn't use the exemption last year.
Small gifts: up to £250 per person each tax year, to as many people as you like — but not to someone who already received your £3,000 annual exemption.
Wedding or civil partnership gifts: up to £5,000 to a child, £2,500 to a grandchild or great-grandchild, or £1,000 to anyone else.
Regular gifts from surplus income: no limit, provided the gifts come from your regular income (not savings or capital), form a pattern, and leave you with enough to maintain your usual standard of living.
Gifts to a spouse, civil partner, UK charity or political party are exempt regardless of amount.
The seven-year rule explained
Larger gifts — sometimes called 'potentially exempt transfers' — become completely free of inheritance tax only if you live for seven years after making them.
If you die within seven years and your total gifts in that period (added to your estate) exceed the £325,000 inheritance tax threshold, tax may be due on the gift. Taper relief reduces the rate on gifts made 3 to 7 years before death: 32% (3–4 years), 24% (4–5 years), 16% (5–6 years), 8% (6–7 years). Gifts made within 3 years of death are taxed at the full 40% rate on the amount above the threshold. After seven years, the gift is outside your estate entirely.
A common misunderstanding: taper relief only reduces the tax on the gift itself, and only applies once total gifts exceed the £325,000 threshold — it doesn't reduce tax on your wider estate.
Gifts you still benefit from
If you give something away but keep using or benefiting from it — for example, gifting your home to your children but continuing to live there rent-free — HMRC treats this as a 'gift with reservation of benefit', and it can still count as part of your estate regardless of how long ago you gave it. Paying a market rent can change this, but get advice before relying on it.
Practical steps for gifting to children
Keep a simple written record of what you've gifted, to whom, and when — your executors will need this to work out what's taxable.
If you're thinking about a large one-off gift (such as help with a house deposit), check it against the seven-year rule and consider whether you can afford it without risking your own financial security, including future care costs.
Think about using the annual £3,000 exemption and small gifts allowance every year rather than one large gift, since these are immediately outside your estate.
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Questions
Questions people also ask
How much can I gift to my children tax-free each year?
£3,000 under the annual exemption (plus any unused amount carried forward from the previous year), plus £250 small gifts to others, wedding gifts, and unlimited regular gifts from surplus income.
What is the 7-year rule for gifts?
Larger gifts only become completely free of inheritance tax if you survive seven years after making them. If you die sooner and the gift pushes your estate over the £325,000 threshold, tax may be due, reduced by taper relief for gifts made 3–7 years before death.
Do I pay tax if I give my child money for a deposit?
Not immediately — but it's a potentially exempt transfer. If you die within seven years, it may be counted as part of your estate for inheritance tax, depending on the total value of gifts and your estate.
Can I gift money from my pension or savings without affecting myself?
You need enough left to maintain your own standard of living and cover future needs, including potential care costs — gifting too much too soon is a real risk. This is general education; a solicitor or regulated adviser can look at your full circumstances.
Does Empowering Wealth give inheritance tax advice?
No. We provide education and community support to help you understand the rules and feel confident speaking to a solicitor, tax adviser or FCA-regulated financial adviser. MoneyHelper and GOV.UK have official guidance.