You can give away up to £3,000, in total, per tax year which will be automatically exempt from inheritance tax, known as your ‘annual exemption’. If you haven’t gifted any money the previous tax year, you can carry forward any unused allowance, enabling you to give away up to £6,000 in the current year.

In addition, the small gifts allowance enables you to give up to £250 free from inheritance tax (IHT) to as many people as you like, each tax year. However, you cannot use this allowance together with any other exemption when giving to the same person. You can also make regular exempt gifts if they are from your surplus income. This can be a valuable tax exemption where there is a large surplus of income after your normal expenditure.

It’s possible to give one-off larger sums that won’t be counted for tax purposes, provided you survive for seven years afterwards. Such a gift may be tax-free and is known as a ‘potentially exempt transfer’.

If you don’t survive the full seven years, these gifts will use part of your nil rate band (£325,000 for the 2016/17 tax year) available to offset against your estate on death. Any gifts outside this limit are subject to IHT at 40% which will have to be paid by your estate.

It is important to remember that tax rules are ever changing and everyone's tax position, and plans, will be different. There are many options out there and it is vital you do not leave yourself short, as living costs tend to rise and we never know what we will need later in life!