Answers · UK 2025/26
What is the seven-year rule for Inheritance Tax?
The seven-year rule means gifts you make during your lifetime fall entirely outside your estate for Inheritance Tax purposes if you survive at least seven years after making them. If you die within seven years, the gift may be chargeable to IHT (subject to taper relief reducing the rate after three years), depending on whether it exceeds your available £325,000 Nil Rate Band.
Full answer
The seven-year rule underpins most lifetime gifting strategies for Inheritance Tax planning, and understanding it correctly is essential before making significant gifts intended to reduce a future IHT bill. **Potentially Exempt Transfers (PETs)** Most lifetime gifts to individuals (as opposed to certain trusts) are classed as Potentially Exempt Transfers -- they become fully exempt from IHT if the giver survives at least seven years from the date of the gift. If the giver dies within seven years, the gift is reconsidered as part of the estate and may become chargeable. **What determines if tax is actually due** Even if you die within seven years, IHT is only actually charged on the gift if it exceeds your available Nil Rate Band (£325,000 for 2026/27) once combined with other gifts made in the same period and the rest of your estate -- gifts are counted in chronological order, so earlier gifts use up the Nil Rate Band first, potentially leaving later gifts more exposed. **Annual exemptions that fall outside the 7-year rule** Certain gifts are immediately exempt regardless of the seven-year rule: the £3,000 annual gift exemption (which can carry forward one unused year), small gifts of £250 or less per recipient, regular gifts out of surplus income (not capital), and wedding gifts up to certain limits -- these do not use up any of the seven-year PET tracking. **Chargeable Lifetime Transfers** Gifts into most types of trust (rather than directly to individuals) are usually Chargeable Lifetime Transfers rather than PETs, potentially triggering an immediate 20% IHT charge if they exceed the Nil Rate Band at the time of the gift, with a further charge possible if the giver dies within seven years -- trust gifting has different and generally stricter rules than direct gifts to individuals. **Worked example** Someone gifts £200,000 to their child and dies 4 years later, having made no other significant gifts, with their full £325,000 Nil Rate Band available. Since the gift is within the Nil Rate Band, no IHT is due on it at all -- the seven-year rule and taper relief are irrelevant here because the gift never exceeded the available exemption. **Why timing and sequencing matter** For larger estates, the order and timing of gifts matters significantly for planning purposes -- making substantial gifts as early as possible maximises the chance of surviving the full seven years, and spreading gifts across multiple years can help make the best use of annual exemptions alongside larger PETs. **Practical tip** If you are considering significant lifetime gifting for IHT planning, keep detailed records (date, amount, recipient) for every gift and consider taking out a reducing-term life insurance policy written in trust to cover the potential IHT liability during the seven-year exposure window, giving your family certainty regardless of when death occurs.
Try the calculator
More answers
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.