Can I Just Gift £100k to My Son?

Yes, you can gift £100,000 to your son with no immediate tax charge. Neither you nor your son pays tax at the point of transfer, and your son does not pay income tax on the gift.

The seven-year rule

The catch is the 7-year rule. The gift is classed as a Potentially Exempt Transfer (PET) under the Inheritance Tax Act 1984. If you survive 7 years after making the gift, it falls completely outside your estate and no IHT is owed. If you die within 7 years, the £100,000 is brought back into your estate for IHT purposes.

It will first use up part of your £325,000 nil-rate band. The HMRC threshold tables hold that band at £325,000 until 5 April 2031, and the separate residence nil-rate band at £175,000 until 5 April 2030. If your total estate plus gifts exceed that threshold, the excess is taxed at 40%. That bill falls on the estate rather than on the person who received the gift, so your son becomes liable in his own right only if you gave away more than £325,000 in total in those seven years.

A sliding taper relief reduces the IHT rate on the gift if you survive between 3 and 7 years. It cuts the rate charged on the gift itself: 32% at three to four years, 24% at four to five, 16% at five to six, 8% at six to seven, and nothing after seven. It also only applies where the total gifted in those seven years comes to more than £325,000, which is why on a single £100,000 gift it never comes into play. HMRC sets both out in its rules on giving gifts.

You also have an annual exemption of £3,000 per tax year, which is immediately outside your estate. You can carry forward one previous year's unused exemption too, giving you up to £6,000 exempt from day one. GOV.UK lists those allowances under its rules on giving gifts. So of that £100,000, roughly £94,000 sits as a PET subject to the 7-year rule, and that is the figure your executors will have to evidence years after you made the gift.

The record you need to keep

Keep a clear written record of the gift, including the date and amount. HMRC can ask for evidence of gifts made within 7 years of death, and missing records cause real problems during probate.

For a broader look at reducing Inheritance Tax on larger gifts to family, see our guide on passing unlimited amounts to children tax-free.

Gifts of this size are worth checking with an inheritance tax specialist before you make them rather than after.

What happens if I gift £100,000 and then need the money back?

Then it was probably never a gift. A gift only leaves your estate if you give up all benefit from it. Hand over £100,000 but carry on drawing on the account, or give away a property and carry on living in it, and HMRC treats it as a gift with reservation: it stays inside your estate for inheritance tax however long you live afterwards. Give what you can afford to part with for good, and keep the rest where you can reach it.

Do I have to tell HMRC about a £100,000 gift?

Not at the time you make it. The declaration happens after death: your executors list significant gifts made in the seven years before death on form IHT403, which goes in with the IHT400. That is why the date and amount need writing down when the gift is made, rather than reconstructed later.