Glossary · UK
What is Taper Relief (IHT 7-Year Rule)?
A relief that reduces the Inheritance Tax due on gifts made between three and seven years before death on a sliding scale.
Full Definition
If you give away assets and die within seven years, the gift may count towards your estate for Inheritance Tax (IHT). Taper relief reduces the tax payable on that gift once it has survived more than three years, on a sliding scale: gifts made 3–4 years before death attract 80% of the full 40% rate, 4–5 years 60%, 5–6 years 40%, and 6–7 years 20%; gifts surviving seven full years fall outside the estate entirely. A common misconception is that taper relief reduces the gift's value — it only reduces the tax, and only where the gift exceeds the £325,000 nil-rate band. Gifts within the nil-rate band attract no tax, so taper relief gives no benefit. The residence nil-rate band (£175,000) does not apply to lifetime gifts. Tax on tapered gifts is normally paid by the recipient. IHT is charged at 40% (36% where 10%+ of the estate passes to charity). Inheritance Tax is a UK-wide tax with identical rules in Scotland, Wales and Northern Ireland, although devolved property transaction taxes (LBTT, LTT) operate separately and are unaffected.