Dad Gifted Me £60,000 in 2023 and Now HMRC Wants Tax

Your father gave you money before he died, he did not live seven years after giving it, and now inheritance tax is in the picture. The question you actually want answered is a personal one: does the tax on that gift come out of the estate, or can HMRC come after you for it? The honest answer is that it can be either, and which one it is turns on a single number — whether the gifts your father made in his last seven years add up to more than his tax-free allowance.

Here is the short version. If everything he gave away in those seven years stayed within the £325,000 nil-rate band, there is no tax on your gift at all. The gift simply uses up part of his allowance, which leaves less of it for the rest of the estate, so the estate pays a little more tax on what is left. You, the person who received the gift, pay nothing. But once the total of those gifts goes over the allowance, the gift itself becomes taxable, and the person the law looks to first for that tax is the person who received it. That is you.

Source: GOV.UK, How Inheritance Tax on a gift is paid, HM Revenue and Customs. The nil-rate band is £325,000 and the annual gift exemption is £3,000.

The short answer: sometimes the estate, sometimes you

Inheritance tax treats a gift to another person as a "potentially exempt transfer". If the giver survives seven years, it is fully exempt and nobody pays anything. If they die within seven years, the gift is pulled back into the reckoning and may become chargeable. Yours has become chargeable in the sense that it now has to be counted; whether it actually generates a tax bill is a separate question.

The reason the answer to "who pays" is not fixed is that a gift does two different things at once. It uses up the giver's tax-free allowance, and — only once the allowance is exhausted — it can carry a tax charge in its own right. The first effect falls on the estate. The second falls, first of all, on you. Working out which effect you are dealing with is the whole of the puzzle, and it comes down to how much your father gave away in total.

When your gift carries no tax of its own

Most gifts within families never generate a penny of tax on the gift itself, because most people do not give away more than £325,000 in their final seven years. If your father's gifts over that period, added together, come to less than the nil-rate band, then the whole of the allowance covers them and there is no tax to charge on any of them.

What the gifts have done, though, is eat into the allowance. Suppose he gave away £60,000 and made no other gifts. That £60,000 uses up £60,000 of his £325,000 band, leaving £265,000 to set against the rest of his estate on death. If the estate is large enough to be taxable, it now has less allowance to shelter it, so the estate's own tax bill is a little higher than it would have been. That extra tax is the estate's to pay, out of estate money, before anyone inherits. It is not charged to you, and HMRC will not write to you about it.

This is the scenario the family usually means when they say "the estate pays it". The gift is not taxed; it simply shifts a slice of the allowance away from the estate. You keep the £60,000 in full.

When the gift itself is taxable — and why that lands on you

The picture changes once the running total of gifts passes £325,000. At that point the allowance is used up, and any further gift — or the part of a gift that tips over the line — is chargeable in its own right. And here is the part that surprises people: the tax on a chargeable lifetime gift is, in the first instance, the responsibility of the person who received the gift.

The estate is not the first port of call for that particular tax. The recipient is. HMRC can look to the personal representatives — the executors dealing with the estate — but only as a backstop, and only if the tax on the gift has not been paid within twelve months of the end of the month in which the death occurred. Up to that point, it is the recipient's bill.

Source: Inheritance Tax Act 1984, sections 199 and 204, as explained in HMRC's Inheritance Tax Manual (GOV.UK). The person who received the gift is primarily liable for the tax on it; the personal representatives become liable only if it remains unpaid twelve months after the end of the month of death.

So if you were told "don't worry, the estate handles all of it", that is right for gifts within the allowance and wrong for gifts that push past it. If your father was generous over the years and the total is well over £325,000, and yours is one of the later gifts, you could receive a demand addressed to you personally. It is not a mistake or a scare tactic; it is how the liability is designed to work.

The order gifts eat the nil-rate band: earliest first

Which gifts end up taxable is not random, and it is not the biggest ones. Gifts are set against the nil-rate band in the order they were made, earliest first. The oldest gifts get first claim on the allowance; the most recent gifts are left exposed once the allowance runs out.

This is the opposite of what families expect. People assume a gift from six years ago is riskier because it is "older", or that the largest gift must be the one that is taxed. In fact the reverse is usually true. An early gift is sheltered by the full allowance and often falls away entirely. It is the gift made eighteen months before death — the most recent one — that is most likely to sit above the line and be taxable, because everything before it has already absorbed the band.

So if you are the person who received the most recent large gift, you are also, unfairly as it can feel, the person most likely to be carrying the tax. Working out the order and the running total is the first thing an executor should do when gifts are involved, and it is worth asking to see that calculation rather than accepting a bald figure.

Taper relief: what it actually reduces, and when it does nothing

Taper relief is the most misunderstood part of this entire subject. People hear that a gift made four years before death gets a reduction, and assume their tax is cut accordingly. Very often it is cut by nothing, because there was no tax to reduce in the first place.

Taper relief reduces the tax on a gift, not the value of the gift, and it only exists where the gift is already taxable — that is, where the cumulative gifts have gone over £325,000. It also only applies to gifts made more than three years before death. Within the table below, the percentage is the rate of tax that applies to the gift once taper is taken into account.

Source: GOV.UK, How Inheritance Tax on a gift is paid, HM Revenue and Customs.

Read that table with the earlier point in mind. Taper only helps the gifts that are taxable, which are the recent ones — and the recent ones sit at the top of the table, where the reduction is smallest. A gift in the six-to-seven-year band gets the largest reduction, but a gift that old has usually already fallen within the allowance and carries no tax to reduce. The relief looks generous and delivers far less than the headline suggests. If your gift was comfortably within the £325,000 band, taper relief is simply irrelevant to you: there was never any tax for it to touch.

The exemptions that take a gift out of the sum entirely

Before you assume a gift counts at all, check whether it was exempt to begin with — because exempt gifts never enter the seven-year calculation. Several everyday gifts fall outside it completely.

• The annual exemption lets a person give away £3,000 each tax year with no inheritance tax implications, and an unused annual exemption can be carried forward one year.
• Small gifts of up to £250 to any one person in a tax year are exempt, provided that person did not also receive the annual exemption.
• Wedding or civil partnership gifts are exempt up to set limits that depend on the giver's relationship to the couple.
• Gifts made as normal expenditure out of income — regular payments a person could make from their income without dipping into capital, such as helping with a grandchild's school fees — can be exempt, and this one is often overlooked.
• Gifts between spouses and civil partners are generally exempt without limit, though there is a cap where the receiving spouse is a partner who is not long-term UK resident.

Source: GOV.UK, Inheritance Tax: gifts and exemptions, HM Revenue and Customs.

These exemptions matter because they can shrink the sum dramatically. A father who gave £60,000 in one go used one annual exemption of £3,000 against it, so £57,000 is the potentially exempt amount, not the full sum — and if he made regular gifts out of surplus income on top, those may not count at all. Where gifts are being paid to help a family manage day to day, it is worth separating what was truly a lump-sum gift from what was really ongoing support the family was living on, because the two are treated very differently.

What to do if you have had a large gift and are worried

If you received a substantial gift and the person who made it has died within seven years, the calm first step is to ask the executor for the full picture: the list of gifts, their dates, the running total against the £325,000 band, and where yours falls in the order. That tells you at once whether your gift is taxable or merely used up part of the allowance.

If your gift is taxable and the tax is yours to pay, do not simply sit on it — interest can run on unpaid inheritance tax, and the estate's ability to settle everything else can depend on the gifts being dealt with. The tax on gifts is reported alongside the estate when the executor finalises matters with HMRC, and where the estate itself has a bill it may be met through the arrangements for paying inheritance tax from a frozen account or, on an inherited property, by spreading the tax on a house over ten yearly instalments. If a house sells for less than the value used, there may also be relief for a property that sold below its probate value.

The best protection, though, is arranged before anyone dies. Where a large gift has been made and the giver is not in the best of health, the recipient can take out life cover on the giver's life to meet the potential tax if the seven years are not completed — often written to reduce as the risk tapers away. If that is the situation you are in, you can get life insurance quotes and have an FCA-authorised broker size the cover against the actual gift and the years remaining. It is worth doing this well before a death, not after, because it stops the tax on a gift from turning into a scramble to find cash. Bear in mind, too, that a gift can interact with a family provision dispute; a disappointed relative has only six months from the grant to bring an Inheritance Act claim.

Scotland and Northern Ireland

Inheritance tax is a UK-wide tax collected by HMRC, so the seven-year rule, the £325,000 nil-rate band, the earliest-first ordering and the recipient's primary liability all work identically whether your father lived in Aberdeen, Belfast, Bangor or Birmingham. There is no separate Scottish or Northern Irish rate of inheritance tax and no different threshold.

What can differ is the wider machinery of dealing with the death — the grant of representation is called confirmation in Scotland and is obtained differently, and Scotland has its own rules of forced inheritance for spouses and children that can affect who ends up with what. But none of that changes the tax on the gift itself or who is liable to pay it. Our wider guides on probate, the estate and inheritance tax cover how those regional differences fit around the same UK-wide tax. HMRC will also usually allow reasonable funeral costs as a deduction from the estate, though there are limits on what counts, which we set out in what HMRC will and will not allow for the wake and the headstone.

Frequently asked questions

Who pays inheritance tax on a gift made before death?

It depends on whether the gift is itself taxable. Gifts that fall within the £325,000 nil-rate band carry no tax of their own; they use up part of the allowance, so the estate pays a little more on what is left, and the recipient pays nothing. Once the total of gifts in the seven years before death exceeds the nil-rate band, the gift itself becomes chargeable, and the person who received it is primarily liable for that tax. If it is not paid within twelve months of the end of the month in which the person died, HMRC can then look to the estate.

Does taper relief reduce the tax on my gift?

Only where the total of gifts made in the seven years before death exceeds the nil-rate band, and only for gifts made more than three years before the death. Taper reduces the tax on the gift, not the value of the gift, so where a gift was within the allowance and carried no tax in the first place, taper relief makes no difference at all. Because the taxable gifts tend to be the most recent ones, they also attract the smallest reductions.

In what order are gifts set against the allowance?

Gifts are set against the nil-rate band in date order, earliest first. The oldest gifts absorb the allowance, and the most recent gifts are the ones most likely to be taxable — the opposite of what many families expect when they add the seven years up. If you received the most recent large gift, you are also the person most likely to be carrying tax on it.