Anyone making gifts should keep a running note of what they gave, to whom, its value and the date, because their executors will have to report gifts made in the seven years before death on schedule IHT403. Gifts claimed as exempt need more: the exemption used, and for regular gifts out of income, a yearly record of income and spending. Without it, executors have to rebuild years of bank statements and may lose exemptions they cannot prove.

Why does a donor’s record keeping fall on the executors?

GOV.UK tells donors that the person dealing with their estate will need to work out what gifts they gave in the seven years before death, and asks them to keep a record of what they gave and to whom, the value of the gift and when they gave it. The executors then report those gifts on schedule IHT403, “Gifts and other transfers of value”, with the IHT400. Each row of the IHT403 asks for the date of the gift, the name and relationship of the recipient, a description of what was given, the type of exemption or relief claimed, the value at the date of the gift, the exemptions or reliefs deducted and the net value.

Those columns are, in effect, the record a donor should keep. If the donor kept them as they went, the executors copy them across. If not, the executors must reconstruct them from statements, letters and memories, often while the deadline for the IHT400 is running.

The burden of proof is also a reason to keep records. Section 21 of the Inheritance Tax Act 1984 makes gifts out of income exempt only if, or to the extent that, it is shown that the conditions are met. An exemption no one can evidence is an exemption HMRC can refuse.

Which gifts do executors not have to list?

The IHT400 notes (question 30) say executors can answer “No” and skip the IHT403 if the only gifts were to a spouse or civil partner covered by the spouse exemption, outright gifts to any individual of no more than £250 in a year, outright gifts of money or listed shares wholly covered by the annual exemption, or regular gifts from income totalling no more than £3,000 in each year. The IHT403 itself says not to report gifts where the total was £3,000 or less in a tax year, small amounts of £250 or less, or gifts to a spouse or civil partner.

That is a reason to keep records of small gifts too. Executors can only rely on these exclusions if they know the totals for each tax year, and the annual exemption runs from 6 April to 5 April.

What should be recorded for each type of gift?

Gift What to keep
Cash covered by the annual exemption Date, amount, recipient and the tax year. The exemption is £3,000 a year, and any unused part carries forward one year only. Where gifts are made on different days in one tax year, HMRC sets the exemption against the earliest first (IHTM14143), so the order of gifts counts.
Small gifts Totals per person per tax year. Section 20 exempts gifts to one person only if that year’s total is no more than £250, and GOV.UK says the allowance cannot be combined with another allowance for the same person.
Wedding or civil partnership gifts The wedding date and the relationship, since the limit is £5,000 to a child, £2,500 to a grandchild or great grandchild and £1,000 to anyone else, and section 22 requires the gift to be made in consideration of the marriage or civil partnership.
Gifts of property, shares or valuables Evidence of value at the date of the gift, because that is the figure the IHT403 asks for. GOV.UK points out that selling something for less than it is worth also counts as a gift of the difference.
Life insurance premiums paid for someone else The policy, any trust deed or loan agreement, and every premium paid. The IHT400 notes require copies of the policy documents and details of all premiums even where the gifts out of income exemption is claimed.
Gifts into trust The trust deed, the value transferred and any IHT100 sent at the time. The IHT403 asks for chargeable transfers in the seven years before the earliest gift listed, so a trust gift can be relevant for up to 14 years; see the seven year rule for lifetime gifts.

For deaths on or after 6 April 2026, the IHT403 explains that 100% agricultural and business relief is limited to a combined £2.5 million, and that this includes qualifying gifts made on or after 30 October 2024 within seven years of death. Donors who give away a business or farm should keep the evidence that the property qualified at the time of the gift.

What records support gifts out of income?

This exemption depends on records more than any other. If executors claim it, they answer “Yes” to question 6 of the IHT403 and complete page 8, which asks for the deceased’s income (salary, pensions, interest, investments, rents, the income element of annuities and other income, less income tax) and expenditure (mortgage, insurance, household bills, Council Tax, travel, entertainment, holidays, nursing home fees and other costs) for each year gifts were made, with the surplus and the gifts. The IHT400 notes say bank statements and bills need not be sent with the form, but executors should be ready to produce documentary evidence of income and spending if HMRC asks.

HMRC’s guidance shows what the records need to prove. A pattern of giving is normally looked at over three or four years (IHTM14242). Income is tested year by year, and without evidence to the contrary HMRC treats income as becoming capital after two years (IHTM14250). Gifts of capital assets do not qualify unless bought from income for the purpose. A donor making regular gifts should therefore keep:

  • an annual schedule of net income and normal spending for each tax year;
  • bank statements showing the gifts leaving an account fed by income, although HMRC does not need each gift matched to specific money (IHTM14250);
  • a letter or note recording the intention to give regularly, and any standing order mandate.

Excepted estate status also depends on this. The IHT400 notes say that for the excepted estate conditions, gifts out of income totalling more than £3,000 in any year must be shown in full. The exemption itself is explained in normal expenditure out of income.

What about gifts the donor still benefits from?

The IHT403 asks about gifts with reservation made at any time after 18 March 1986, and the IHT400 notes stress there is no seven year limit for these. The notes give the example of a parent who gives a house to a child and keeps living there: if the parent pays a market rent, the house is not brought back into the estate, but the gift must still be reported. So the donor should keep the tenancy, evidence of how the rent was set and proof that it was paid. Where the reservation ends, for example when market rent starts, the notes treat the gift as made on that date, so the start date of the rent should be clear from the records. See gifts with reservation of benefit.

How might a simple gifts log look?

Illustration only. Helen keeps a one page log for each tax year. In 2025 to 2026 it shows:

  • £300 a month to her granddaughter’s rent, paid by standing order from the account her pension goes into, with a note of her net pension income and her usual monthly spending, which leaves a surplus;
  • £20,000 to her son on 3 September 2025 towards a house deposit, with a note that it is an outright gift, covered first by the 2025 to 2026 annual exemption and then by the unused 2024 to 2025 exemption, leaving £14,000 as a potentially exempt transfer;
  • £100 birthday presents to each of four grandchildren, under the small gifts limit.

If Helen dies within seven years, her executors can transfer the £20,000 gift straight to page 3 of the IHT403, attach her income and spending figures to page 8 for the regular rent payments, and leave the small gifts out.

What mistakes make the gifts schedule hard to complete?

  • Recording the amount but not the date, so the annual exemption and the seven year window cannot be applied.
  • Making regular gifts from a savings account rather than from income, or with no note of income and spending.
  • Giving shares, jewellery or a property without a valuation at the date of the gift.
  • Living in a gifted home and paying rent without a written agreement or evidence of market rent.
  • Executors relying on what the family remembers rather than checking statements for the full seven years; omissions can lead to penalties for errors in an inheritance tax account.

Where an attorney makes gifts for the donor, the same records are needed; see gifts by attorneys.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.