Gifts out of surplus income

Copyright © 2025 LexisNexis
Produced by Tolley in association with Emma Haley at Boodle Hatfield LLP
Trusts and Inheritance Tax
Guidance

Gifts out of surplus income

Copyright © 2025 LexisNexis
Produced by Tolley in association with Emma Haley at Boodle Hatfield LLP
Trusts and Inheritance Tax
Guidance
imgtext

A valuable exemption from inheritance tax (IHT) applies to gifts out of surplus income. This exemption applies only to lifetime gifts and is therefore a key part of lifetime planning. The exemption applies to both outright gifts and gifts into trust.

Gifts which meet the qualifying conditions (see below) are immediately exempt from IHT, so it is not necessary to survive seven years to obtain the exemption. Exempt gifts are not aggregated with later gifts and do not eat into the IHT nil rate band. Clients should make use of basic exemptions such as this before embarking on more complex lifetime planning.

There is no set limit on the amount that can be given away, provided the gift does not exceed the donor’s surplus income.

When does the exemption apply?

The qualifying conditions in order for this exemption to apply are as follows.

The gift must be made from income

Gifts made from capital will not be covered by the exemption and it will ultimately be necessary to demonstrate

Continue reading the full document
To gain access to additional expert tax guidance, workflow tools, generative tax AI, and tax research, register for a free trial of Tolley+™
TAKE A FREE TRIAL NOW
Emma Haley
Emma Haley linkedinicon twittericon worldicon

Associate at Boodle Hatfield LLP 

Emma Haley is a senior associate solicitor at leading private client firm, Boodle Hatfield LLP, renowned for providing first-class and practical legal advice to wealthy clients around the world.Emma has many years experience in dealing with all aspects of wills, probate, capital taxation and succession planning as well as UK and offshore trusts. Emma currently heads up a technical know-how team and is a regular writer and lecturer on estate planning and inheritance tax and also a member of the Society of Trust and Estate Practitioners.

Read moreRead more
Powered by Tolley+™
  • 25 Nov 2025 11:40

Home/ Tolley Tax Guidance/ Trusts and Inheritance Tax / IHT planning

Popular Articles

Trusts and Inheritance Tax

Gifts out of surplus income

Gifts out of surplus incomeA valuable exemption from inheritance tax (IHT) applies to gifts out of surplus income. This exemption applies only to lifetime gifts and is therefore a key part of lifetime planning. The exemption applies to both outright gifts and gifts into trust. Gifts which meet the

14 Jul 2020 11:48 | Produced by Tolley in association with Emma Haley at Boodle Hatfield LLP Read more Read more
Owner-Managed Businesses

Residential property and capital allowances

Residential property and capital allowancesResidential property ― plant and machinery allowancesOrdinary residential property does not, and never has, qualified for capital allowances. as CAA 2001, s 35 denies plant allowances for expenditure incurred in providing plant or machinery for use in a

14 Jul 2020 17:14 | Produced by Tolley in association with Martin Wilson and Steven Bone Read more Read more
Value Added Tax

Exemption ― burial and cremation

Exemption ― burial and cremationThis guidance note provides an overview of the VAT treatment of services that are provided in connection with the burial or cremation of human remains.VAT treatmentThe following services are exempt from VAT:•the disposal of the remains of the dead•making arrangements

14 Jul 2020 11:38 | Produced by Tolley Read more Read more