Reporting Gifts to HMRC
When and how to report lifetime gifts for inheritance tax purposes
Key Takeaways
- • Most gifts don't need immediate reporting to HMRC
- • Report gifts when submitting inheritance tax forms after death
- • Use form IHT403 for detailed gift reporting on death
- • Keep detailed records of all significant gifts
Report lifetime gifts on IHT403 (Gifts and other transfers of value) together with the main IHT400. Prepare a year-by-year schedule for the 7 years before death showing dates, amounts/values, recipients and which allowances were used.
When Gifts Need Reporting
Unlike some tax matters, most gifts don't require immediate reporting to HMRC when you make them. Instead, gifts are typically reported as part of the inheritance tax process after someone dies.
- • Gifts covered by the £3,000 annual exemption (including any 1-year carry-forward)
- • £250 small gifts per person
- • Gifts to a spouse/civil partner
(Keep private records anyway.)
Generally, you don't need to report gifts to HMRC while you're alive, even large ones.
- • No immediate reporting required
- • Keep detailed records yourself
- • Exception: gifts into certain trusts
Executors must report all significant gifts made in the 7 years before death.
- • Use form IHT403 for gift details
- • Report gifts over annual exemptions
- • Include all potentially exempt transfers
When do PETs get reported?
Potentially Exempt Transfers (PETs) are not reported at the time of the gift. They are reported on death if the donor dies within 7 years of making them; include them on IHT403 and apply the normal ordering rules.
Lifetime reporting while alive (IHT100)
For Chargeable Lifetime Transfers (CLTs) (e.g., gifts to discretionary trusts) or trust chargeable events, file IHT100 and pay any tax by the end of the sixth month after the month of the event. Obtain a payment reference via IHT122.
Form IHT403: Schedule of Gifts
Form IHT403 is the main document for reporting gifts to HMRC. Executors complete this as part of the inheritance tax return when someone dies.
- • All gifts made in the 7 years before death
- • Gifts exceeding annual exemptions (over £3,000 per year)
- • Details of recipients and relationships
- • Values of gifts at the time they were made
- • Dates when gifts were made
- • Any conditions attached to the gifts
Gifts That Must Be Reported Immediately
While most gifts don't require immediate reporting, there are some exceptions where you need to inform HMRC straight away:
- • Gifts into discretionary trusts (chargeable lifetime transfers)
- • Gifts that exceed the nil rate band at the time of making
- • Certain gifts to companies
- • Gifts where immediate inheritance tax is due
If the donor continues to benefit from a gifted asset (e.g., gifts a home but keeps living there without market rent), the value can be pulled back into the estate on death. Consider POAT implications where relevant.
Record Keeping Requirements
Even though you don't report most gifts immediately, keeping detailed records is essential. Your executors will need this information later.
- • Recipient name/relationship
- • Date and amount/value of the gift (and any valuation notes)
- • Which allowance was used (annual, small, wedding/civil partnership, gifts out of income) — see gift allowances
- • Evidence of payment/transfer
- • For gifts out of income: a simple multi-year income vs expenditure summary showing the gifts were from income and did not reduce your usual standard of living
- • Date of each gift
- • Value at time of gift
- • Recipient's full name
- • Relationship to recipient
- • Description of what was given
- • Any conditions or restrictions
- • Bank statements showing transfers
- • Property transfer documents
- • Valuations for non-cash gifts
- • Trust deeds if applicable
- • Correspondence about the gift
- • Professional advice received
Reporting Deadlines
Understanding when gifts need to be reported helps ensure compliance with HMRC requirements:
Chargeable Lifetime Transfers
File IHT100 by the end of the sixth month after the month of the event.
Post-Death Reporting
Include all relevant gifts on IHT403, typically due within 12 months of death (or 6 months if inheritance tax is payable).
- • PETs are not filed immediately; they are picked up on death if within 7 years.
- • IHT100 is for chargeable lifetime events (trusts/CLTs); the deadline is end of the sixth month after the month of the event.
- • You don't itemise on IHT403 gifts that are fully covered by £3,000 annual or £250 small-gift allowances, or spouse/civil partner gifts.
Common Reporting Mistakes
Avoid these frequent errors when dealing with gift reporting:
- • Forgetting to report gifts made more than 3 years before death
- • Undervaluing gifts, especially property or business assets
- • Not keeping adequate records of gift circumstances
- • Failing to report gifts with conditions or reservations
- • Missing gifts made through joint accounts
- • Not reporting regular payments that exceed exemptions
Professional Help
Given the complexity of gift reporting rules, especially for larger estates or complex gifts, professional advice is often valuable. Tax advisers can help ensure all gifts are properly documented and reported when required.