I often tell clients who come to me for advice on mitigating Inheritance Tax that using the small exemptions regularly can result in a substantial saving over time. Every person has an annual exemption of £3,000, which means that they can make one gift of that amount each year and even if they were to die the next die that amount would be outside of their estate for Inheritance Tax.

A married couple can each make a gift of £3,000 and if you didn't make any gifts last year then you can use last year's exemption as well. You can also make as many gifts of £250 to different people as you want

However, often when I am involved in administering an estate, people seem to have got the two exemptions confused and have made several gifts of £3,000 believing them to be exempt, whereas any more than 1 made in any of the last seven years before the deceased died will be added back into the estate for Inheritance Tax purposes.

Another word of warning - if you do decide to use your annual exemptions would be to keep records, because your executors are legally obliged (and can be fined and prosecuted by HMRC) to declare all gifts over and above the normal exemptions for the seven years prior to death.

I'm currently dealing with an estate where we have had to apply to the bank to get copies of numerous cheques to check whether they are gifts or not, because we know the deceased made regular gifts, we just don't know when or to whom. So make sure you record all gifts you make so that the appropriate exemptions can be claimed.

If the gifts you are making are regular and come out of your income, it may be that they can fall under another under used exemption called "Normal Expenditure out of Income" and, even if they are over £3,000, can fall out of your estate immediately, which could prove to be a very valuable exemption indeed.