7 Year Rule Inheritance Tax
Estimate the Inheritance Tax due on a gift under the 7 year rule, and see exactly how taper relief lowers the rate the longer you survive after gifting.
Calculate Tax on a Lifetime Gift
Enter the value of the gift, how long ago it was made, and the nil-rate band still available to instantly see the Inheritance Tax that could be due.
7 Year Rule Calculator
See how taper relief reduces the tax on a gift over time.
How it Works
Understanding the 7 year rule
Deduct the Nil-Rate Band
We first subtract your available nil-rate band from the gift value, since only the amount above this threshold can ever be taxed.
Apply the Standard Rate
Any taxable amount is charged at the standard 40% Inheritance Tax rate if the gift was made within the last 3 years.
Apply Taper Relief
Between 3 and 7 years, the effective rate steps down in stages, reducing the tax due on the taxable portion of the gift.
Full Exemption After 7 Years
Once 7 full years have passed since the gift was made, it falls outside your estate entirely and no Inheritance Tax is due on it.
Taper Relief Rates
A general overview of how the effective Inheritance Tax rate on a gift reduces the longer you survive after making it.
| Years Between Gift and Death | Taper Relief | Effective Tax Rate |
|---|---|---|
| Less than 3 years | 0% | 40% |
| 3 to 4 years | 20% | 32% |
| 4 to 5 years | 40% | 24% |
| 5 to 6 years | 60% | 16% |
| 6 to 7 years | 80% | 8% |
| 7 years or more | 100% | 0% |
7 Year Rule FAQ
Answers to the most frequently asked questions about the 7 year rule and Inheritance Tax on gifts.
The 7 year rule means that gifts you make during your lifetime, known as Potentially Exempt Transfers, only become fully exempt from Inheritance Tax if you survive for 7 years after making them. If you die within 7 years, the gift may be counted back into your estate and taxed.
Taper relief reduces the rate of Inheritance Tax charged on a gift the longer you survive after making it, but only applies once the gift exceeds your available nil-rate band. There is no reduction in the first 3 years, then the effective rate steps down every year until it reaches zero after 7 years.
Cash gifts, property transfers, shares, and putting assets into most types of trust can all count as gifts for Inheritance Tax purposes. Certain gifts are exempt straight away, such as small gifts under £250, wedding gifts within set limits, and regular gifts made out of surplus income.
In most cases, the tax on a failed gift is paid out of the deceased’s estate, but if the estate cannot cover it, HMRC can ask the person who received the gift to pay the tax instead. This is one reason gift recipients are often encouraged to keep some funds aside during the 7 year period.