Answers · UK 2025/26
How does taper relief work on Inheritance Tax gifts?
Taper relief reduces the Inheritance Tax charged on gifts made between three and seven years before death, on a sliding scale from 20% relief (gifts made 3-4 years before death) up to 80% relief (6-7 years before death). It only applies if the gift itself would otherwise exceed the £325,000 Nil Rate Band and be chargeable to IHT -- it does not reduce tax on gifts that were already within the Nil Rate Band.
Full answer
Taper relief is one of the most commonly misunderstood aspects of Inheritance Tax gifting rules, and understanding exactly what it does (and does not) apply to is important for effective estate planning. **The basic seven-year rule** Gifts made more than seven years before death fall entirely outside the estate for IHT purposes and are not taxed at all. Gifts made within seven years of death are potentially chargeable, but only if they exceed the available Nil Rate Band (£325,000 for 2026/27) once combined with the rest of the estate. **The taper relief scale** If a gift made within seven years of death DOES exceed the available Nil Rate Band and becomes chargeable, taper relief reduces the tax rate applied (not the value of the gift itself) on a sliding scale: 0% relief for gifts made within 3 years of death (full 40% IHT rate applies); 20% relief for gifts made 3-4 years before death; 40% relief for 4-5 years; 60% relief for 5-6 years; 80% relief for 6-7 years before death. **The crucial misunderstanding** Taper relief does NOT reduce IHT on a gift that falls entirely within the available Nil Rate Band -- it only reduces the tax rate on the portion of a gift that exceeds the Nil Rate Band. Many people wrongly assume that surviving even three years after a gift provides some automatic tax reduction, but if the gift (combined with the estate) is within the £325,000 Nil Rate Band, there was no tax due in the first place, so taper relief is irrelevant. **Worked example** Someone gifts £425,000 to their child and dies 5.5 years later, having made no other gifts and with a Nil Rate Band of £325,000 fully available. The gift exceeds the Nil Rate Band by £100,000 -- this excess is chargeable to IHT. Without taper relief, tax would be £100,000 × 40% = £40,000. With 60% taper relief (5-6 years band), tax is reduced by 60%, leaving £16,000 due. **The recipient usually pays** Where IHT becomes due on a gift because the giver died within seven years, it is normally the RECIPIENT of the gift who is liable to pay the tax (not the estate), which surprises many people who assumed all IHT is settled from the estate itself. **Practical tip** Keep clear, dated records of all significant gifts made, including the amount, date, and recipient, since executors need this information to correctly calculate any IHT due on gifts within seven years of death -- poor record-keeping is one of the most common causes of complications during probate.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.