A seven-year-rule error is costing UK households thousands as they fall foul of HMRC inheritance tax rules. UK households are warned a gift must be a full transfer of ownership, and the person who made the gift must give up all control or benefit over the property, for it to be considered a potentially exempt transfer (PET).

This will mean it is not subject to inheritance tax seven years after the gift was made. If there is any reservation of benefit, the gift will not be considered a PET and may still be subject to inheritance tax.

UK Property Accountants said: "You may wonder how to save your children from getting hit with huge inheritance tax (IHT) bills. You may also consider whether it’s better to make lifetime gifts or leave them in your estate."

Discussing "t he 7-Year Rule that can Save IHT", it said: " Plan to make lifetime gifts that are potentially exempt transfers (i.e., not to the trust) which will not lead to an immediate charge to inheritance tax.

"In this case, the inheritance tax liability only arises if the donor passes away within 7 years of making the gift." It added: "Tips: There is no inheritance tax liability if the donor survives more than seven years after the transfer of gift."