IHT403: reporting gifts in an estate

Form IHT403 is the schedule to the IHT400 on which executors list what the deceased gave away during their lifetime: gifts and trust transfers in the seven years before death, gifts with reservation of benefit and pre owned assets made at any time since 18 March 1986, earlier chargeable transfers that affect the tax on those gifts, and any claim that regular gifts were exempt as normal expenditure out of income. Its totals feed into the IHT400 so HMRC can see how much of the nil rate band the gifts used.

When do executors have to fill in IHT403?

Question 30 of the IHT400 asks about gifts. The IHT400 notes allow executors to answer No, and skip IHT403, only if every gift the deceased made fell into one of these groups:

• gifts to a spouse or civil partner covered by the spouse or civil partner exemption
• outright gifts to any individual of no more than £250 in any one year, covered by the small gifts exemption
• outright gifts of money or listed shares wholly covered by the annual exemption
• outright gifts made regularly from income where the total did not exceed £3,000 in each year

Anything else since 18 March 1986 has to be reported, including transfers into trust, insurance premiums paid for someone else, advances out of a trust fund and assets taken out of a trust before death. The notes explain that a transfer of value is, in general, any transaction where the deceased did not receive full value in exchange, because the law looks for a loss to the donor. Their examples include selling a house to a child below open market value, selling shares so that the seller loses control of a company, granting a lease at less than full market rent and agreeing to act as guarantor for someone else’s debts. For how the schedule fits the rest of the account, see completing the IHT400.

How is the seven year section filled in?

Page 1 asks six yes or no questions covering gifts to individuals, charities or organisations, trusts created or added to, life policy premiums paid for someone else, trust interests that ended during the deceased’s lifetime, and claims for gifts out of income.

Each gift then goes in the table at box 7, which has columns for the date, the recipient and their relationship to the deceased, a description of the asset, the type of exemption or relief, A the value at the date of the gift, B the exemptions or reliefs deducted, C the percentage of relief claimed (100% or 50%) and D the net value. The total of column D is copied to IHT400 box 113 or to box 4 of the IHT400 Calculation. Where charity exemption is deducted, the form asks for the charity’s full name, country of establishment and HMRC charities reference.

Taper relief is not deducted on the form. HMRC says it will send separate calculations including any taper relief if tax is due on the gifts. For gifts of agricultural or business property, the form explains that for deaths on and after 6 April 2026, 100% relief on the combined value of qualifying property is limited to £2.5 million, a figure that includes qualifying gifts made on or after 30 October 2024 and within seven years of death, with the excess relieved at 50%. Shares on markets such as AIM that are not listed for HMRC purposes now qualify for 50% relief only. The rules on relief being withdrawn from gifted business property are covered in business relief clawback on lifetime gifts.

Where do gifts with reservation and pre owned assets go?

Questions 8 to 11 ask whether the deceased kept use, enjoyment or a benefit from something given away, whether the recipient failed to take full possession, and, for a house or other property, whether the deceased or their spouse or civil partner kept a significant right or interest, or was party to an arrangement such as a lease or trust, that let them occupy or benefit from it. The notes give examples such as a parent who gave a house to their son and carried on living there without paying rent, or a painting that stayed on the parent’s wall. There is no seven year limit for these gifts. They are valued at the date of death in box 12. If a market rent was paid, the asset is not added to the estate, but the gift must still be shown.

If the reservation ended before death, the notes treat the gift as an outright gift made on the date it ended. Where that date is within seven years of death, it goes in the seven year table instead, at its value when the reservation ceased, and no exemptions can be deducted from it. The wider rules are in gifts with reservation of benefit.

Questions 13 to 16 deal with pre owned assets. The income tax charge on pre owned assets began in 2005 to 2006, and a person could instead elect on form IHT500 to have the asset treated as a gift with reservation. The notes say the election cannot be made on the deceased’s behalf after death. The combined total of gifts with reservation and pre owned assets (box 12 plus box 16) is entered at box 17 and copied to IHT400 box 104.

Why does IHT403 ask about earlier transfers?

Box 18 asks whether the deceased made any chargeable transfers in the seven years before the earliest gift shown at box 7. The notes explain that tax on a gift is worked out by adding it to chargeable gifts made in the seven years before that gift. A chargeable gift here means one not wholly covered by exemptions that was made before 18 March 1986, was made between 18 March 1986 and 21 March 2006 to a company or discretionary trust, or was made on or after 22 March 2006 to anyone other than an individual, a disabled trust or a bereaved minor’s trust on the end of an immediate post death interest. Gifts between individuals do not go here. Details go in box 19 but are left out of the tax calculation, and HMRC considers them after the grant. This is the reporting side of the 14 year rule.

How is a normal expenditure out of income claim made?

Section 21 of the Inheritance Tax Act 1984 exempts a gift shown to be part of the transferor’s normal expenditure, made out of income taking one year with another, and leaving enough income to maintain their usual standard of living. Answering Yes to question 6 means completing boxes 20 to 22 for each tax year in which gifts were made: income by source (salary, pensions, interest, investments, rents, the income element of annuities and other income) less income tax paid; spending on items such as mortgages, insurance, household bills, council tax, travel, holidays and nursing home fees; and the surplus against the gifts made. The notes say bank statements and bills need not be sent at this stage, but executors should be ready to produce evidence if HMRC asks. The conditions are explained in normal expenditure out of income.

Who pays the tax on gifts, and why does the form ask for contacts?

The form states that if inheritance tax is due on the gifts, the people who received them are liable for it, separately from the tax on the estate, and that a year after the death the executors or administrators become jointly liable. HMRC can only discuss the gifts with the executors if the recipients have authorised them; if not, the form asks for each recipient’s contact details. Where total gifts are below the nil rate band, the notes explain that the gifts use up the band first and the recipients pay nothing, while the estate pays more. More on this in who pays IHT on lifetime gifts.

How does this look in practice?

Illustration only. Margaret dies in 2026. Four years earlier she gave her daughter £60,000 in cash, having made no other gifts that tax year or the year before. Every Christmas she paid £2,000 to each of two grandchildren from surplus pension income. In 2015 she gave her house to her son but carried on living there rent free.

• The £60,000 goes in box 7, with £6,000 of annual exemption (the current and previous years) in column B, leaving £54,000 in column D.
• The Christmas gifts also go in box 7, described as normal expenditure out of income, with boxes 20 to 22 completed for each year.
• The house goes in box 12 at its value at death, because the reservation never ended, and flows through box 17 to IHT400 box 104.
• Box 18 is answered No because there were no earlier chargeable transfers, and the executors move to box 20 because question 6 was answered Yes.

What mistakes come up most often?

• Deducting taper relief on the form instead of leaving HMRC to apply it.
• Leaving out sales at an undervalue, guarantees or cheap leases because they do not feel like gifts.
• Assuming a house given away more than seven years ago drops out, when the donor kept living there.
• Deducting the annual exemption from a gift that became outright when a reservation ended.
• Claiming the income exemption without year by year income and spending figures.
• Putting earlier trust transfers from box 19 into the tax calculation.

Good records made during the donor’s lifetime save most of this work; see keeping records of lifetime gifts.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Related Accountapedia entries

• How inheritance tax is calculated on an estate
• When an estate becomes a trust
• Reporting a gift into trust on form IHT100
• Real estate elections for VAT
• The trust and estate tax return (SA900)

See also: IHT410 form: life assurance and annuities schedule.

Sources

• GOV.UK: Inheritance tax gifts and other transfers of value iht403
• GOV.UK: Inheritance tax inheritance tax account iht400
• legislation.gov.uk: Act 1984 c. 51, section 21
• GOV.UK: Gifts

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.