Martin Lewis has warned that giving money to family members could have inheritance tax implications if rules are not followed.
The financial expert raised concerns on his BBC podcast while discussing gifting rules with tax specialists, highlighting how regular financial support to children or grandchildren could be counted towards an estate if not properly managed.
Experts said keeping detailed records of gifts is essential to avoid complications when inheritance tax is assessed.
The main annual allowance allows individuals to give away £3,000 each tax year without it being added to their estate, and this can be given to one person or split between multiple recipients.
There is also a seven‑year rule, meaning gifts made more than seven years before death are typically exempt from inheritance tax.
Lucie Spencer, partner at Evelyn Partners, said: “So there’s the large gift allowance, which is £3,000 per individual per tax year.”
She explained that unused allowance from the previous tax year can be carried forward, saying: “If you haven’t given that £3,000 in the last tax year, you can effectively give £6,000 today.”
This operates separately from the seven‑year exemption and other reliefs.
Martin Lewis warns gifting money to family could trigger inheritance tax hit
|Martin Lewis
Mr Lewis clarified that the £3,000 allowance does not need to be given to a single individual.
A separate small‑gift allowance enables people to give £250 to multiple recipients, but the two allowances cannot be combined for the same person.
Ms Spencer said: “What I can’t do is give a person £1 more,” meaning the £250 limit cannot be topped up.
Wedding gifts are subject to different exemptions.
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Experts also outlined when people should begin tracking gifts.
Mr Lewis asked when individuals should start documenting financial support.
Ms Brown suggested this could begin in a person’s early 40s, while Ms Spencer said: “I would say in your 50s,” adding that this often coincides with receiving an inheritance and having greater wealth.
Experts recommend keeping a written or digital record of all gifts alongside a will.
Ms Spencer said: “When someone passes away and you come to complete their inheritance tax form, there’s actually a whole list where you have to detail all of the gifts which you’ve made leading up to your death.”