Taper Relief Inheritance Tax UK (2026): The 7-Year Rule Reduction Table Explained

Taper relief is a reduction in the inheritance tax (IHT) charged on gifts (technically called potentially exempt transfers or PETs) made within 7 years before death. If the donor dies within 7 years of making a gift, IHT may be due on that gift. However, if the gift was made more than 3 years before death, taper relief reduces the amount of IHT payable — not the value of the gift itself. The relief works on a sliding scale: gifts made 3–4 years before death get 20% relief; gifts made 6–7 years before death get 80% relief. If you survive 7 years from the date of the gift, no IHT applies at all.

The taper relief percentages are set by IHTA 1984 s7(4) and have not changed. Years between gift and death: 0–3 years — 0% relief (full 40% rate applies); 3–4 years — 20% relief (effective rate 32%); 4–5 years — 40% relief (effective rate 24%); 5–6 years — 60% relief (effective rate 16%); 6–7 years — 80% relief (effective rate 8%). Over 7 years — 100% relief (0% IHT). Important: the relief reduces the tax payable, not the value of the gift. A gift of £100,000 made 4–5 years before death at 40% IHT with 40% taper relief = £16,000 tax, not £24,000 on a reduced gift value.

No — taper relief only applies to potentially exempt transfers (PETs), which are outright gifts to individuals. It does not apply to chargeable lifetime transfers (CLTs) such as gifts to discretionary trusts, which are taxed at the time of the gift (at 20%) and then recalculated on death if within 7 years. Taper relief also does not apply to: gifts to companies; gifts with reservation of benefit (where the donor continues to benefit from the asset); or assets already exempt from IHT (e.g. gifts to spouses, charities, or within the annual £3,000 exemption). Only gifts that exceed the nil rate band are subject to IHT in the first place — taper relief is irrelevant if no IHT is due.

This is the most widely misunderstood aspect of taper relief. Taper relief does NOT reduce the value of the gift that is offset against the nil rate band (NRB) of £325,000. Gifts made in the 7 years before death use up the NRB first — at their full value. Only the IHT payable on the portion of gifts that exceeds the NRB receives taper relief. Example: a donor with no NRB remaining makes a £100,000 gift and dies 4–5 years later. IHT = £100,000 × 40% × (1 − 40% taper) = £24,000. But if the same £100,000 gift was within the NRB, no IHT applies and taper relief is irrelevant regardless of the years since the gift.

Whether IHT applies to a gift made within 7 years of death depends on cumulation — the running total of all chargeable gifts made in the previous 7 years (plus the estate at death). The nil rate band (£325,000 in 2026) is applied against the oldest gifts first. If total cumulative gifts exceed the NRB, IHT is charged at 40% on the excess (subject to taper relief based on how many years before death each gift was made). To model this accurately: list all gifts made in the 7 years before death; apply the NRB against the earliest gifts first; identify which gifts (if any) remain after the NRB is used up; apply the taper relief table to those excess gifts.

Taper relief is most valuable for large gifts made to individuals where the donor has already used their NRB. Key planning points: make gifts as early as possible — the 7-year clock starts on the date of the gift; use annual exemptions (£3,000/year), small gift exemptions (£250 per recipient), and normal expenditure from income first — these are IHT-free regardless of survival; consider gifts on marriage/civil partnership (up to £5,000 parent, £2,500 grandparent, £1,000 others); for very large gifts above the NRB, a 7-year term life insurance policy written in trust can cover the potential IHT liability in the event of early death; keep records of all gifts with dates and values — HMRC will require this information from executors after death.

These terms are often used interchangeably but describe different things. The 7-year rule refers to the principle that gifts made more than 7 years before death are completely outside the estate for IHT purposes — they become fully exempt. Taper relief refers specifically to the sliding scale of reductions that apply to gifts made between 3 and 7 years before death. In other words: the 7-year rule is the destination (complete exemption at 7 years); taper relief is the transition mechanism (graduated relief from 3–7 years). Gifts made less than 3 years before death receive no taper relief — the full 40% rate applies.