outline how HMRC views this so you understand the rules before making any moves.—1. Annual Gift Allowance in the UK, each individual has a £3,000 annual gift allowance (“annual exemption”) that can be given away each tax year without triggering inheritance tax (IHT).You can carry forward one year’s unused allowance—so potentially £6,000 in year one if you didn’t use it the previous year.—2. Small Gift Exemption you may give up to £250 per person per tax year to as many individuals as you like, provided they don’t also receive part of your £3,000 annual exemption.So yes, you could give £250 to 400 different people (£100,000 total) and it would fall under this exemption if those people don’t receive any other exempt gifts from you.3. Circular Gift self those 400 people then immediately pay the money to your daughters, HMRC would see this as a “gift with reservation of benefit” or a pass-through scheme.That means the exemption is unlikely to apply—the gifts wouldn’t be considered genuinely made to those 400 individuals, but rather a way of funneling money to your daughters.HMRC could disregard the small gift exemption and treat the whole £100,000 as a potentially taxable transfer.4. The Seven-Year Rule outside exemptions, gifts are “potentially exempt transfers (PETs).”If you survive 7 years from making the gift, no IHT is due.If you pass within 7 years, the value may be pulled back into your estate, with taper relief after 3 years. What you can do:Use the £3,000 annual exemption plus £250 small gifts genuinely to lots of different people.Make larger outright gifts directly to your daughters—provided you’re comfortable with the 7-year rule.Consider gifts out of surplus income (if it doesn’t reduce your standard of living), which are also IHT-free. What won’t work:Giving £250 to 400 people with the understanding that they pass it straight to your daughters—HMRC will challenge that as avoidance.If your goal is to move £100,000 tax-efficiently to your daughters, a more robust plan would combine:Using annual exemptions,Potentially exempt transfers (PETs), and”Normal expenditure out of income” exemptions if applicable.
let’s walk through a practical, HMRC-compliant plan for moving £100,000 to your daughters while minimising or avoiding inheritance tax (IHT).
Step 1 – Use the Annual Gift Exemption
Each parent has £3,000 per year (£6,000 if you’re a couple).
If last year’s allowance was unused, you can gift £6,000 each in year one.
That means up to £12,000 (or £24,000 for a couple) could be given away immediately and never counted for IHT.
Step 2 – Use the Small Gifts Exemption (£250)
You can gift £250 per person per year, to as many individuals as you like.
However, you can’t combine this with the £3,000 allowance for the same recipient.
If your daughters each have children, partners, or close family members, you could gift them £250 each per year. This won’t cover huge sums, but every bit chips away.
Step 3 – Consider “Gifts out of Income”
If you have regular surplus income (e.g., pension, investments, rent), you can make gifts out of that income without them ever falling into IHT—provided:
- It’s regular,
- It doesn’t reduce your normal standard of living,
- You document it.
- Example: If you can comfortably spare £10,000 per year from income, you could transfer that amount to your daughters annually, and it’s outside your estate immediately.
Step 4 – Larger Gifts (Potentially Exempt Transfers, PETs)
You can gift any amount, to anyone, at any time.
If you survive 7 years, there’s no IHT.
If you pass away within 7 years, the gift is pulled back into your estate, but taper relief reduces the tax after 3 years.
You could simply transfer £100,000 outright now. If you live 7 years, your daughters keep it free of IHT. If not, part may be taxed.
Step 5 – Alternative Wrappers
If you want extra flexibility:
Trusts – you can place money in trust for your daughters, but complex rules apply and may trigger charges if over the £325k nil-rate band.
Junior ISAs / Lifetime ISAs – tax-efficient if grandchildren are involved.
Pensions – passing money into pensions can be inheritance-tax efficient.
Illustrative Path for £100,000
Year 1: £6,000 annual exemption (x2 if a couple = £12,000).
Year 1: Small gifts to other family members (say £1,500).
Year 1: Surplus income gift of £10,000.
Immediate PET gift of £70,000–80,000 to daughters.
Document everything carefully (HMRC form IHT403 is useful).
Over 7 years, the £100,000 should be outside your estate with minimal IHT exposure.
Key Point:
What won’t work is funnelling £250 through hundreds of people with the understanding that they hand it back to your daughters — HMRC will disallow it as artificial avoidance.
