Glossary · UK
What is IHT Taper Relief on Gifts?
A reduction in inheritance tax on gifts made 3-7 years before death, reducing the IHT rate from 40% on a sliding scale.
Full Definition
If a potentially exempt transfer (PET) or chargeable lifetime transfer (CLT) is made more than 3 years before death, taper relief reduces the IHT rate. Between 3-4 years before death: 20% reduction (effective rate 32%); 4-5 years: 40% (24%); 5-6 years: 60% (16%); 6-7 years: 80% (8%). After 7 years, the gift falls out of the estate entirely. Taper relief applies to the tax on the gift, not the gift itself -- and only once the nil-rate band is exceeded.
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Disclaimer: Definitions are for guidance only. For decisions about your tax, savings, property or pension situation, always consult a qualified professional or refer to gov.uk.