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You can take your estate out of Inheritance Tax (IHT) by reducing the size of it. One way to do this is to make lifetime gifts. A gift may attract IHT, however, if it is made less than 7 years prior to your death. You could also consider making gifts which fall into the lifetime exemptions category for IHT purposes, such as the annual gift exemption (transfers of up to £3,000 in each tax year are exempt), the small gifts exemption (a gift of less than £250 to any one person in a tax year is exempt) and gifts in consideration of marriage or civil partnership: £5,000 made by the person’s parent; £2,500 made by the person’s grandparent; and £1,000 made by anyone else. These will reduce your estate but will not attract IHT.
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