What is inheritance tax, who pays it and will it change?

Anyone can give away up to £3,000 a year, and pay no tax. This is known as the annual exemption. If unused, this allowance can be carried over to the following year, up to a maximum of £6,000.

In addition, if you can show that the gift was funded out of income – as opposed to savings – you will not pay inheritance tax. There are also allowances for wedding gifts.

However, if someone gives a bigger sum, then dies within seven years, then the money may be used as part of inheritance tax calculations.

It is thought changes to a number of exemptions are under consideration for the Budget, including the rules around gifts that are given while you are alive.