More than 14,000 British households were landed an unexpected bill from the tax office for breaking a key seven-year gift rule.

HM Revenue and Customs (HMRC) has collected millions of pounds in inheritance tax, the UK’s “most hated tax”, for “gifts gone wrong” because relatives died within seven years of gifting them. Not only do the grieving families have to go through the bereavement, but they also have to part ways with some value of the gifts. Figures show that 14,030 gifts were subject to inheritance tax during the 2022/23 financial year, The Times reports. The 25 biggest “failed gifts” were worth £7.9 million each on average after allowances and exemptions were used up.

Inheritance tax is charged at 40% on the value of your estate above the inheritance tax-free allowance of £325,000.

This allowance increases to £500,000 if it includes a main home left to a direct descendant (a child or grandchild) and the estate is worth less than £2million.

One way to reduce an inheritance tax bill – if your estate exceeds the threshold – is to gift some of your wealth to loved ones. However, there are strict rules to adhere to to avoid a charge.

Gifts given less than seven years before someone’s death may be subject to tax based on the recipient’s relationship, the gift’s value, and the date it was given.

Gifts can include money, household and personal goods, for example, furniture, jewellery or antiques, a house, land or buildings, stocks and shares listed on the London Stock Exchange, and unlisted shares you held for less than two years before your death.

But if the person dies between three and seven years after making the gift (and their estate exceeds the nil-rate inheritance tax threshold), tax is charged on a sliding scale of 8% to 32%.

Michelle Holgate from the investment firm RBC Brewin Dolphin, which submitted the freedom of information request, said: “Strategic gifting was once seen as a tactic of the super-affluent, but has now gone mainstream.

“We’re getting inquiries in particular from farmers looking to pass on assets such as land to the next generation without triggering a big inheritance tax bill.”

It follows the reforms introduced by Rachel Reeves to the death tax in the 2024 Autumn Budget, which reduced Agricultural Property Relief and Business Property Relief. Under rules that become effective from April 2026, only the first £1million of combined agricultural and business assets will remain fully exempt from IHT.

For any assets above this threshold, IHT will apply at an effective rate of 20%, due to a 50% relief on the standard tax rate of 40%.

At present, qualifying agricultural property can benefit from up to 100% relief from IHT. Critics have warned that the move, when it takes effect, could spell the end of family farms.

Read more about inheritance tax gifting rules here.