Comparison · Inheritance Tax · 2026/27
IHT Taper Relief vs the 7-Year Gifting Rule UK 2026/27
The 7-year rule is what makes most lifetime gifts fully exempt from Inheritance Tax over time. Taper relief is a much narrower, frequently misunderstood relief that only reduces the tax rate on gifts above the Nil Rate Band where death falls between 3 and 7 years after the gift. Here is how the two actually work for 2026/27.
TL;DR - 30-Second Summary
- - 7-year rule: gifts become fully IHT-exempt if you survive 7 years after making them
- - Taper relief: only reduces the tax RATE on the part of a gift above the £325,000 Nil Rate Band, for deaths between years 3-7
- - No taper relief benefit if your gifts stay within the available Nil Rate Band, or if death occurs within 3 years
Taper Relief Bands
| Years between gift and death | Reduction in IHT rate on the excess |
|---|---|
| 0-3 years | 0% (full 40% rate applies) |
| 3-4 years | 20% |
| 4-5 years | 40% |
| 5-6 years | 60% |
| 6-7 years | 80% |
| 7+ years | 100% (fully exempt under the 7-year rule) |
Frequently Asked Questions
What is the 7-year gifting rule?
Most lifetime gifts to individuals are "potentially exempt transfers" (PETs) — they fall entirely outside your estate for Inheritance Tax if you survive 7 years after making them. If you die within 7 years, the gift can become chargeable, using up some of your £325,000 Nil Rate Band first, with Inheritance Tax only due on the excess.
What is taper relief and how does it differ from the 7-year rule?
Taper relief is a separate, narrower relief that only reduces the rate of tax charged on a gift that is itself over the Nil Rate Band and where death occurs between 3 and 7 years after the gift — it does not reduce tax on gifts fully covered by the Nil Rate Band, and it does not make a gift exempt on its own.
What are the taper relief bands?
Taper relief reduces the Inheritance Tax rate on the chargeable part of a gift on a sliding scale: 0% reduction if death is within 3 years, 20% reduction between 3-4 years, 40% between 4-5 years, 60% between 5-6 years, and 80% between 6-7 years, before the gift becomes fully exempt at 7 years.
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Is it a common misunderstanding that taper relief reduces IHT on modest gifts?
Yes, very common. Taper relief only ever applies to the tax on the part of a gift that exceeds the available Nil Rate Band at death — if your total gifts in the 7 years before death are within your £325,000 Nil Rate Band, there is no tax to taper in the first place, so taper relief provides no benefit at all.
Does taper relief help if I die 2 years after a large gift?
No — taper relief gives no reduction at all for deaths within the first 3 years of a gift. The full 40% Inheritance Tax rate applies to any chargeable excess above the Nil Rate Band if death occurs within that initial 3-year window.
How should I plan around these rules?
The 7-year rule is what actually removes a gift from your estate over time; taper relief is a secondary, partial mitigation only relevant to gifts above the Nil Rate Band where death falls between years 3 and 7. For most estate planning, surviving the full 7 years (or keeping gifts within the Nil Rate Band) is far more valuable than relying on taper relief.
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Disclaimer: This is educational information, not tax advice. Inheritance Tax gifting rules are complex, especially where multiple gifts and reliefs interact — see gov.uk/inheritance-tax/gifts and consult a qualified estate planner for your specific situation.
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