After you die your estate could be subject to Inheritance Tax (IHT), depending on its value.

If you give your money away then live for 7 years the gifts are not subject to IHT.

You can give away up to £3,000 (as at 2014/5) in each tax year and these gifts will be exempt from Inheritance Tax when you die. You can carry forward any unused part of the exemption to the following year, but if you don’t use it in that year, the carried-over exemption expires.

You can also make separate small gifts (up to £250 in 2014/5) to as many individuals as you like in any one tax year. However if you give more than the relevant exempt amount to an individual the exemption is lost.

After a death it can be very hard to piece together the gifts made by the deceased.  If gifts are not declared to HMRC fines are likely to be charged, in addition to the actual tax which has to be paid.

You should therefore keep a list of all gifts you make in excess of £250, who the gift is to and the date it is made.