The £3,000 annual exemption
Every tax year you can give away up to £3,000 in total, and it leaves your estate immediately — it's completely free of Inheritance Tax with no 7-year wait. This is the "annual exemption", and it's separate from the nil-rate band.
Carry forward one year
If you didn't use last year's £3,000, you can carry it forward one tax year, giving up to £6,000 this year. You use the current year's allowance first, then last year's. It can't be carried forward more than one year.
Other tax-free gifts on top
Beyond the annual exemption you can also give small gifts of up to £250 per person to as many people as you like, regular gifts out of surplus income, and wedding gifts (£5,000 to a child, £2,500 to a grandchild, £1,000 to anyone else). Anything above your exemptions becomes a Potentially Exempt Transfer — tax-free only if you survive 7 years.
Example: £8,000 of gifts, last year unused
With carry-forward you have £6,000 of annual exemption, so £6,000 is exempt at once. The remaining £2,000 is a PET — it leaves your estate fully only if you live another 7 years.
Is the £3,000 per person or in total?
In total per giver, per year — not per recipient. You can split it between several people, but the whole exemption is £3,000 (or £6,000 with carry-forward).
Do the £250 small gifts count towards the £3,000?
No — small gifts of up to £250 per person are a separate exemption, as long as that person didn't also receive part of your £3,000.
More United Kingdom calculators
This calculator applies the £3,000 annual exemption and one-year carry-forward for 2026/27 and is for general information only — not financial, tax or legal advice. It doesn't model small-gift, wedding or normal-expenditure exemptions in the total, or the 7-year rule on the excess. See GOV.UK. Source: GOV.UK (Inheritance Tax on gifts).