Gifts From Parents: Do You Pay Tax on Money You're Given?

If a parent gives you money, you pay no tax on it. The UK has no gift tax and a cash gift is not income, so there is nothing to declare on a tax return and no limit on the amount your mum or dad can hand over. The only tax that can ever arise is inheritance tax (IHT), which is worked out against the giver's estate — usually paid by the estate, and only in narrow cases by you.

Key points

• There is no income tax and no "gift tax" on money received from a parent, whatever the size of the gift.
• Gifts made in the seven years before the giver dies can be pulled back into their estate for inheritance tax at 40% above the available nil-rate band.
• The nil-rate band is £325,000, plus up to £175,000 of residence nil-rate band where a home passes to children or grandchildren.
• Interest or dividends you later earn on gifted money are taxable in your hands.
• You do not tell HMRC about a gift. The giver's executors disclose seven years of gifts after a death.

The recipient pays nothing on the gift itself

Income tax applies to earnings, pensions, profits, rent, interest and dividends. A gift from a family member is none of those, so it never appears on a Self Assessment return and it does not use up your Personal Allowance of £12,570. Whether your parent gives you £500 or £200,000, the receipt itself is tax-free — and that answers the common search "can my mum give me 20k?" She can, today, with no tax consequence for you.

The same applies to the giver: there is no tax charge at the moment a gift is made. Nothing is deducted, nothing is reported, and the money does not need to pass through a solicitor.

Income earned on the money is taxable

Once the money is yours, any return it generates belongs to you for tax purposes. Put £20,000 in a savings account paying 4% and the £800 of interest is yours to declare. Most people are covered by the Personal Savings Allowance — £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers and nil for additional-rate taxpayers — and there is also a £5,000 starting rate band for savings that can apply if your other income is low. Savings and dividend income are taxed at UK-wide rates even if you live in Scotland; Scottish rates apply only to non-savings income such as wages.

Gifts of assets rather than cash

If the gift is shares, a second property or another chargeable asset, the recipient still pays nothing on receipt — but the giver may face capital gains tax, because a gift is treated as a disposal at market value. The annual exempt amount is £3,000 and the residential property rates are 18% for basic-rate taxpayers and 24% above that. Your acquisition cost for any future sale is the market value on the day of the gift, so it is worth recording that value.

When tax can arise

Almost all gifts from parents fall into one of two categories: immediately exempt, or a "potentially exempt transfer" (PET) that becomes fully exempt once the giver survives seven years.

There is no separate "gift limit" for 2026 that caps what you can receive. The £3,000 figure is the giver's annual exemption — the amount that drops out of their estate immediately. Larger gifts are still allowed; they simply need seven years to clear.

Who actually pays if the seven years are not survived

Failed PETs are set against the nil-rate band first, in the order they were made, before the rest of the estate. That matters enormously for recipients:

• If total gifts in the seven years before death are below the available nil-rate band, no tax is charged on the gift itself. The effect is that less nil-rate band is left for the estate, so the beneficiaries of the will receive less.
• Only where gifts exceed the nil-rate band does tax fall on the gift — and then the person who received it is primarily liable, with the bill due within six months of the end of the month of death.

Worked example 1: a £20,000 gift

Your mother gives you £20,000 in June 2026 and has used neither this year's nor last year's annual exemption.

• Exempt: £3,000 + £3,000 carried forward = £6,000
• PET: £20,000 − £6,000 = £14,000

She dies four years later leaving an estate of £600,000 including her home, which passes to you.

• Allowances: £325,000 nil-rate band + £175,000 residence nil-rate band = £500,000
• The £14,000 gift uses nil-rate band first, leaving £486,000 of allowances
• Taxable estate: £600,000 − £486,000 = £114,000 × 40% = £45,600

Without the gift the bill would have been £600,000 − £500,000 = £100,000 × 40% = £40,000. So the gift added £5,600 of inheritance tax — paid by the estate, not by you personally.

Worked example 2: a gift bigger than the nil-rate band

A father gifts £400,000 to his son and dies five and a half years later.

• PET: £400,000 − £3,000 annual exemption = £397,000
• Nil-rate band set against it: £325,000, leaving £72,000
• Tax before taper: £72,000 × 40% = £28,800
• Taper relief for 5–6 years: 60% reduction, so £28,800 × 40% = £11,520

That £11,520 is the recipient's liability, and the whole nil-rate band has been consumed by the gift, so the estate has little or no allowance left. Taper relief reduces the tax on the gift, not the value counted against the estate.

If the recipient is under 18

Gifts to your own minor children are caught by the parental settlement rules: if income arising from money a parent gave exceeds £100 a year, that income is taxed on the parent rather than the child. Junior ISAs and Child Trust Funds sit outside this. Gifts from grandparents are not affected.

House deposits from parents

A gifted deposit follows exactly the same rules — tax-free to you, a PET or exempt gift for your parent. The complications are practical rather than tax-related:

• Gifted deposit letter. Lenders want written confirmation that the money is a gift with no repayment terms and no stake in the property. If it is really a loan, say so — lenders treat loans differently in affordability checks.
• Anti-money-laundering checks. Your conveyancer must evidence the source of funds. Expect to provide bank statements and an explanation of where your parent's money came from.
• Stamp duty. Receiving cash triggers no stamp duty. But if a parent who already owns a home goes on the title deeds, the additional-property surcharge can apply to the whole price — 5% on top of standard SDLT rates in England and Northern Ireland, 8% ADS in Scotland, and the higher LTT rates in Wales, on purchases of £40,000 or more. It can also cost you first-time buyer relief, which in England and Northern Ireland removes SDLT up to £300,000 on purchases up to £500,000.
• Means-tested support. Large gifts can affect a parent's entitlement to means-tested benefits or local authority care funding if they are treated as deliberately depriving themselves of capital, and can affect the recipient's means-tested benefits because the cash counts as savings.

Does HMRC find out about gifts?

Not at the time — there is no gift register and no return to file. HMRC's interest comes later, in two ways.

First, on a death, the personal representatives must complete inheritance tax paperwork that includes a schedule of gifts made in the previous seven years (form IHT403, filed with the main inheritance tax account). Executors are required to make reasonable enquiries, which normally means reviewing several years of bank statements. Signing off an incomplete account carries penalties, so gifts of any size tend to surface.

Second, HMRC receives large volumes of third-party data — bank interest reporting, Land Registry records, and information under international exchange agreements. A sudden six-figure deposit with no explanation is the sort of thing that prompts questions, particularly where a property purchase is involved.

The practical point is that gifts are not secret, and they do not need to be. A properly documented gift from a parent is entirely legitimate.

Records worth keeping

Because the seven-year clock and the exemptions are only ever tested years later, the evidence problem falls on whoever is left to explain it. Keep:

1. The date and amount of each gift, and which exemption it is meant to use.
2. A short signed letter from the giver stating it is an outright gift with no conditions.
3. Bank statements showing the transfer from the giver's account to yours.
4. For regular gifts out of income, a record of the giver's income and normal expenditure each year — this exemption is frequently refused for lack of evidence.
5. For gifts of assets, a market valuation on the date of the gift, for both capital gains tax and your future base cost.

A simple running list kept by the parent, updated each tax year, saves executors hours and prevents exempt gifts being treated as taxable by default.

What to do next

If the concern is whether gifts could create an inheritance tax bill at all, start with the size of the estate: with a nil-rate band of £325,000, a residence nil-rate band of up to £175,000 and the ability to inherit a spouse's unused bands, many estates never reach the 40% threshold. Run the numbers with our inheritance tax calculator to see whether gifts within seven years would actually change the outcome.

If you have been given money and are now earning interest on it, check whether that interest is covered by your Personal Savings Allowance using the savings interest tax calculator, and see how it sits alongside your other income in the income tax calculator.