Hundred SummersGifts from surplus income: the inheritance tax exemption with no seven-year clock
Regular gifts out of income that leave your standard of living intact are free of inheritance tax at once. See how much of your giving your surplus covers, what the annual exemption adds, and what stays on the seven-year clock. Your figures never leave your browser.
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Worked example
Computed when this page was built by the same engine that runs the calculator above, so the figures below and the live tool can never disagree. Change any input above to see your own.
| Inputs | |
|---|---|
| Income after tax | £60,000 |
| Normal spending | £38,000 |
| Regular gifts a year | £15,000 |
| Estate above the nil-rate bands | Yes |
| Results | |
|---|---|
| Surplus income | £22,000 |
| Exempt straight away | £15,000 |
| Left on the seven-year clock | £0 |
| Inheritance tax kept out of the estate | £6,000 a year, £42,000 over seven years |
The next question
What happens to gifts beyond my surplus income? →7-year rule calculator
Or answer it with everything else: the full Hundred Summers plan connects your pay, pensions, savings, property, tax and spending year by year, and stress-tests them across 500 simulated market histories.
Read the guides
- The 7-year rule for gifts, and why taper relief disappoints →How Potentially Exempt Transfers really interact with the nil-rate band, why taper relief rarely helps gifts under £325,000, and the exemptions that work immediately, including the underused surplus-income rule.
- Pensions and inheritance tax from April 2027 →The biggest pension rule change in a decade: unused pension pots join the estate for inheritance tax from April 2027; what changes, the double-tax effect after 75, and how it rewrites the 'spend the pension last' doctrine.
The three conditions
A gift is exempt as normal expenditure out of income when it is part of your normal pattern of spending (regular, or planned to be from the start), made out of income rather than capital, and leaves you with enough income to keep your usual standard of living. Meet all three and the gift is outside your estate immediately, whatever its size. It suits pensioners whose pension and investment income exceed what they spend, and is often used for school fees, a regular allowance, or premiums on a life policy written in trust for children.
What doesn't fit
Gifts beyond your surplus can use the £3,000 annual exemption (and last year's, if unused). Anything more is a potentially exempt transfer: outside the estate only once you survive seven years, as the seven-year rule calculator shows. The inheritance tax calculator shows whether your estate is likely to pay at all; from April 2027 unused pensions count in it too.
Sources
- gov.uk, Inheritance Tax: gifts.
- HMRC Inheritance Tax Manual, IHTM14231: normal expenditure out of income.
- HMRC, Form IHT403: gifts and other transfers of value.