Can someone explain the tax position on the following. A farmer has 4 nephews and I understand he can gift them each 3k per annum. Assume the farmer has taxable income of 40k in the year. If he makes no gift of 3k he pays tax on the 40k. What is his taxable position if he gifts 12k to the 4 nephews. Does he pay tax on 28k or 40k ?