Many gifts are exempt from Inheritance Tax so make use of these exemptions:

• Gifts between spouses, but if one spouse is not domiciled in the UK, the lifetime exemption is limited to £55,000.
  
  
• Gifts of up to £3,000 in each tax year are exempt and the unused portion of the previous year's exemption can be carried forward but only for one year.
  
  
• A gift of £250 to any one person if the total gifts to that person do not exceed £250. This can be used to cover Christmas and birthday gifts from grandparents to grandchildren.
  
  
• Wedding gifts of up to:
  
  -  £5,000 from each parent to each child; 
  -  £2,500 from each grandparent; 
  -  £1,000 from anybody else.
  
  The gift must be made shortly before the marriage and becomes effective when the marriage takes place.
  
  
• If you have surplus income year on year, this can be gifted free of Inheritance Tax. You need to be able to show that such gifts are part of your regular annual income expenditure and do not reduce your standard of living. The exemption can be used if you pay life insurance premiums for the benefit of someone else. You should keep a record of these gifts and if possible a record of your net (after tax) income. This can be a very useful exemption as there is no upper limit, so it's worth keeping the documentation.
  
  
• Gifts to UK charities, political parties (providing they have at least one MP and 150,000 votes), registered housing associations and gifts for national purposes are also exempt.
  
  
• Maintenance payments to your dependants and ex-spouse.
  
  
• If the gift is not covered by any of these exemptions, then providing you survive for seven years it will be free of Inheritance Tax.

Law stated as at 1 April 2007