Little-known IHT loophole could save families millions The Telegraph’s Charlotte Gifford reports on a little-known loophole that saved 430 families £67m in death duties last year. The “normal expenditure out of income exemption” allows individuals to make unlimited gifts completely free of IHT. The “normal expenditure” rule allows families to gift far larger sums than the commonly used £3,000 annual exemption. But figures from HMRC show the tax break is being underused as anyone with sufficient “surplus income” can it, meaning thousands more families may have neglected to claim. Sean McCann of the financial advice firm NFU Mutual said: “Gifts out of normal expenditure is one of the most powerful but least known exemptions. By allowing you to give away excess income immediately free from IHT, it can help stop your inheritance tax liability growing every month.”