Last updated: 14 October 2026
What can you do to reduce inheritance tax before the end of the tax year?
Before 5 April, use the gift exemptions that don’t roll over indefinitely. Give up to £3,000 under the annual exemption (plus last year’s £3,000 if unused). Make small gifts of £250 per person. Keep up regular gifts out of surplus income. Review pension contributions and nominations ahead of pensions entering IHT on 6 April 2027. These steps reduce your estate without waiting 7 years.
Year-end checklist
| Action | Limit | Why before 5 April |
| Annual exemption | £3,000 a year | You can carry forward only one unused year |
| Small gifts | £250 per person | Annual limit, which can’t be combined with the annual exemption for the same person |
| Gifts out of surplus income | No fixed limit | Shows the regular pattern HMRC wants to see each year |
| Wedding gifts | £5,000 from a parent | Only for weddings in the year |
| Pension contributions | Up to £60,000 annual allowance | Carry forward from 3 years |
| ISA for adult children | £20,000 each | Gifts using exemptions can fund their ISAs |
Gifts out of surplus income
This exemption is unlimited if gifts come from income, form a regular pattern and leave your standard of living unchanged. Tax year-end is a good time to review income and spending and make your annual gift. Record it, because your executors will need evidence on form IHT403.
Larger gifts
Bigger gifts are potentially exempt transfers. The 7-year clock starts on the date of the gift, so gifting sooner rather than later helps, whatever the tax year.
Pensions and April 2027
From 6 April 2027, most unused pension funds will count for IHT. Before then:
- review nomination forms
- consider drawing and gifting pension income, especially if you are over 75
- review whether continuing to contribute is still the best plan
Life insurance in trust
A whole-of-life policy written in trust can cover the IHT bill, and premiums may qualify as gifts out of income.
Example
Margaret has £8,000 of surplus income a year and £3,000 of unused annual exemption from last year. Before 5 April, she gives £6,000 to her son (using two annual exemptions) and £250 to each of her four grandchildren. She also starts a regular £500-a-month gift from income. That is £13,000 in the first year, all outside her estate immediately, which saves up to £5,200 of IHT at 40%.
Year-end gifting mistakes
The £3,000 annual exemption can only be carried forward one year, so unused amounts from earlier years are lost. Regular gifts from income must come from surplus income, not capital, and you need records to prove it. Keep a gifts log with dates, amounts and recipients, and keep bank statements showing the money left your account. Gifts into a trust can have an immediate IHT charge if they’re over the nil-rate band.
Frequently asked questions
Can a couple each give £3,000?
Yes, so £6,000 a year, or £12,000 if both carry forward the previous year.
Do I need to tell HMRC about gifts?
Not while you are alive, but keep records.
Can I give money and still receive income from it?
No. That is a gift with reservation.
Is CGT due on gifts?
Gifts of assets other than cash can trigger CGT, so check before gifting shares or property.
Related: gifting money to reduce inheritance tax and IHT on a deceased person’s gift.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with year-end inheritance tax planning. See our inheritance tax planning service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
