This inheritance tax gift calculator shows how the 7-year taper rule affects IHT on lifetime gifts. Enter the gift value and the number of years since the gift was made to see whether taper relief applies, how much of the nil-rate band is used, and the potential IHT charge if the donor dies within seven years.
7-year taper relief & exemptions
When you give money or assets to another individual, it is called a potentially exempt transfer (PET). If you survive for seven full years after the gift, it drops out of your estate entirely and is free of inheritance tax. If you die within seven years, the gift is added back to your chargeable estate and taxed at up to 40%.
Taper relief does not reduce the value of the gift itself — it reduces the rate of IHT applied. Crucially, taper relief only helps when the cumulative value of chargeable gifts in the seven years before death exceeds the nil-rate band of £325,000. If gifts fall within the NRB, there is no tax to taper.
| Years between gift and death | IHT rate (instead of 40%) |
|---|---|
| 0 – 3 years | 40% |
| 3 – 4 years | 32% |
| 4 – 5 years | 24% |
| 5 – 6 years | 16% |
| 6 – 7 years | 8% |
| 7+ years | 0% (fully exempt) |
Source: gov.uk/inheritance-tax/gifts. These taper percentages have been unchanged since 1988.
Several exemptions are deducted before the 7-year clock and taper relief come into play:
| Exemption | Amount (2026/27) |
|---|---|
| Annual exemption | £3,000 per tax year (can carry forward 1 year = max £6,000) |
| Small gifts | £250 per recipient per tax year |
| Wedding — parent | £5,000 |
| Wedding — grandparent | £2,500 |
| Wedding — other | £1,000 |
| Normal expenditure out of income | No limit (must be habitual, from income, not capital) |
A parent gives £500,000 to a child and dies 4.5 years later. The annual exemption of £3,000 has been used.
Step 1: Chargeable transfer = £500,000 - £3,000 = £497,000
Step 2: NRB remaining (no earlier gifts) = £325,000
Step 3: Taxable above NRB = £497,000 - £325,000 = £172,000
Step 4: Taper at 4-5 years = 24% rate
Step 5: IHT = £172,000 x 24% = £41,280
Without taper relief (death within 3 years), the same gift would attract IHT of £172,000 x 40% = £68,800 — taper saves £27,520 in this scenario. Had the donor survived the full 7 years, the tax would be zero.
Gift early. The 7-year clock starts the moment you make the gift. Earlier gifts have a better chance of being fully exempt and benefit from higher taper relief if not.
Gifts with reservation. If you give away an asset but continue to benefit from it (such as living in a gifted house), HMRC treats it as a gift with reservation of benefit. The asset remains in your estate regardless of when the gift was made.
Multiple gifts use the NRB in chronological order. Older gifts consume the nil-rate band first. If earlier gifts already used part of the NRB, later gifts may face IHT even if they are small individually.
To estimate IHT on your entire estate at death, use the inheritance tax calculator. For estate administration costs after death, see the probate cost calculator. The pension tax-free lump sum calculator can help plan withdrawals that do not form part of your IHT estate.
If you make a gift to an individual and survive for seven years, the gift is completely free of inheritance tax. If you die within seven years, the gift is added back to your estate. Taper relief reduces the tax rate on a sliding scale from year three onwards, but only if the total chargeable gifts exceed the nil-rate band of £325,000.
Taper relief reduces the IHT rate on gifts made between three and seven years before death. The full 40% rate applies in years zero to three. It falls to 32% at three to four years, 24% at four to five, 16% at five to six, and 8% at six to seven years. After seven years the gift is fully exempt.
Each person can give away £3,000 per tax year free of inheritance tax. If you did not use the previous year's allowance, you can carry it forward for one year only, giving a maximum of £6,000. This applies on top of small gifts of up to £250 per recipient.
Yes. Gifts between UK-domiciled spouses or civil partners are completely exempt from inheritance tax with no monetary limit. The exemption also extends to the transfer of the unused nil-rate band on the second death.
The inheritance tax nil-rate band is £325,000 for the 2026/27 tax year. It has been frozen at this level since 2009 and is legislated to remain frozen until at least April 2030. The residence nil-rate band adds a further £175,000 when a home is left to direct descendants.
No. Gifts to qualifying UK charities are exempt from inheritance tax whether made during your lifetime or in your will. If you leave at least 10% of your net estate to charity in your will, the IHT rate on the remaining taxable estate is reduced from 40% to 36%.
A potentially exempt transfer is a gift from one individual to another that becomes fully exempt from IHT if the donor survives for seven years. If the donor dies within seven years, the PET becomes a chargeable transfer and is taxed at up to 40%, reduced by taper relief if applicable.
You can gift your home, but if you continue to live in it or benefit from it without paying full market rent, HMRC treats it as a gift with reservation of benefit and it remains in your estate for IHT purposes. You must genuinely move out and relinquish all benefit for the 7-year rule to apply.
