The 7 year rule on gifts: how taper relief actually works (UK)

18 September 2026 · Inherit Vault

Nearly everyone has heard of the seven year rule, and nearly everyone has the details wrong. The usual belief is that a gift gets gradually cheaper the longer you survive it. That isn't quite what happens, and for most ordinary gifts taper relief does absolutely nothing at all.

The basic rule

Give money or possessions away and, if you live seven more years, the gift is outside your estate for inheritance tax. Die within seven years and it gets added back in when your estate is valued. In the jargon these are potentially exempt transfers, which is a fussy way of saying: probably fine, ask again in seven years.

The exemptions that come first

Before any of that bites, several gifts are simply exempt from the off. You've got an annual exemption of £3,000 a tax year, which you can give to one person or split between several, and you can carry unused annual exemption forward one tax year only. Separately you can make as many small gifts of up to £250 per person as you like each year, provided you haven't used another allowance on that same person. Anything to a spouse or civil partner is exempt without limit, and so is anything to a charity.

Wedding gifts have their own allowance

If someone's getting married or entering a civil partnership you can give £5,000 to a child, £2,500 to a grandchild or great-grandchild, and £1,000 to anyone else. You can stack a wedding gift on top of your annual exemption for the same person, but not on top of the small gift allowance. So a child getting married can have £5,000 plus £3,000 in the same year without any of it counting.

Now the bit everyone gets wrong

Taper relief only applies to gifts above the £325,000 nil rate band. Not to gifts generally. If the total of your gifts in the seven years before death comes to less than £325,000, they're covered by the nil rate band and there's no tax on them to taper in the first place. The £20,000 you gave your daughter in 2023 isn't "taxed at 32%" because you died four years later. It isn't taxed at all. It just uses up part of the band.

What taper actually looks like

Where gifts do exceed £325,000, the tax on the excess reduces on a sliding scale: 32% for gifts three to four years before death, 24% at four to five years, 16% at five to six, 8% at six to seven, and nothing at all after seven. Note those are rates of tax, not discounts off it. Gifts made less than three years before death are taxed at the full 40%.

Who actually pays the bill

This is the detail that causes family arguments. Tax on a failed gift falls on the person who received it, not on the estate, unless the will says otherwise or the recipient can't pay. So the grandchild who got £400,000 in 2024 and spent it on a deposit can find themselves with a bill years later, while the residuary beneficiaries sail through untouched. Anyone making large gifts should say out loud who's expected to carry that risk.

Gifts are ordered oldest first

The nil rate band is applied to lifetime gifts in date order, earliest first. That means an early large gift soaks up the band, and later smaller gifts are the ones left exposed. It's counterintuitive, because the gift that creates the tax charge often isn't the one that caused the problem.

You still have to declare all of it

Executors report gifts on form IHT403, and HMRC asks for seven years of them, with dates, amounts, recipients and which exemption is being claimed. Guessing is not really an option, and "we think there was something around 2021" is how estates end up sitting in a queue. If nobody wrote the gifts down while the donor was alive, somebody reconstructs them from bank statements later, and that person is usually already dealing with everything else probate involves.

The rule that beats the seven year rule

There's a separate exemption for gifts made out of regular surplus income, which is immediately exempt with no seven year wait at all. It's the most underused relief in the system and it's covered in its own right later in this series. Worth knowing it exists before you start counting years.

Reliefs also interact with the seven year clock in ways that have changed recently. Gifts of qualifying agricultural or business property made on or after 30 October 2024 now feed into the £2.5m relief allowance if the donor dies within seven years, which is a genuinely new trap for farming and family-company estates.

None of this is difficult to handle, but it is impossible to reconstruct after the fact. A one page record of what you gave, to whom, on what date, and which exemption it fell under turns a seven year forensic exercise into a five minute one. Your executor will not thank you, because they'll never know how bad it could have been. That's rather the point.

Leave your family a map, not a mystery.

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