Glossary · UK
What is Taper Relief?
A sliding reduction in the Inheritance Tax due on gifts made between three and seven years before death.
Full Definition
Taper relief reduces the Inheritance Tax payable on a failed potentially exempt transfer — a gift made within seven years of death — once the gift has survived at least three years. It does not reduce the value of the gift itself; it reduces the 40% IHT charge on the portion of the gift above the available nil-rate band. The reduction is 20% for gifts made 3–4 years before death, 40% for 4–5 years, 60% for 5–6 years and 80% for 6–7 years, with full exemption after seven years. A common misconception is that taper relief cuts tax on small gifts within the £325,000 nil-rate band — it does not, because such gifts bear no tax to taper. It is most valuable for large lifetime gifts well above the nil-rate band.