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Taper relief reduces the IHT rate on gifts made between 3 and 7 years before death. But it only saves tax when the cumulative gifts exceed the nil-rate band. Many people misunderstand how it works — and overestimate the saving. Worked examples for every year window show exactly what the relief achieves.
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This guide is a companion to our main 7-year gifting rule guide and the gifting strategy guide for 2025/26.
When a gift is made within 7 years of death, it is a "potentially exempt transfer" (PET) that is brought back into the estate. IHT is charged on the gift at the rates in the table below, based on how many years elapsed between the gift and death:
| Years between gift and death | IHT rate on gift | Reduction from 40% |
|---|---|---|
| 0–3 years | 40% | None |
| 3–4 years | 32% | 20% reduction |
| 4–5 years | 24% | 40% reduction |
| 5–6 years | 16% | 60% reduction |
| 6–7 years | 8% | 80% reduction |
| 7+ years | 0% | Fully exempt |
Many people believe taper relief automatically reduces IHT whenever a gift was made more than 3 years before death. This is wrong. Taper relief only reduces IHT that would otherwise be payable on the gift — and IHT on a gift is only due when the cumulative value of gifts exceeds the nil-rate band (£325,000).
More importantly: the nil-rate band is applied first (before taper relief), using up the oldest gifts first. This means taper relief most commonly applies to the portion of gifts that exceeds the NRB — often the most recent gifts, which attract the full 40% rate.
Taper relief provides no benefit here — the gift is fully within the NRB so there is no tax to taper.
Without taper relief (if death had been within 3 years), IHT on the gift would have been £175,000 × 40% = £70,000 — so taper relief saved £28,000.
Gift 1 benefits from the 8% taper rate. But note: because the NRB is applied to the oldest gift first, Gift 1 is mostly within the NRB and the taper relief on the small excess (zero here) provides little saving.
The primary liability for IHT on a gift falls on the recipient of the gift, not the estate. However, if the estate has sufficient assets, the executors may pay IHT on gifts from the estate. The order of liability matters in practice — particularly where recipients of gifts made several years apart have different financial positions.
Taper relief illustrates why the 7-year clock matters so much — surviving 7 years eliminates IHT on the gift entirely, regardless of size. For those in good health making large lifetime gifts, the saving can be substantial.
But taper relief should not be relied upon as the primary planning strategy. It only benefits estates where gifts exceed the NRB, and the saving is at most 80% of the IHT that would otherwise apply. The most powerful tool remains starting early — the sooner a large gift is made, the sooner the 7-year clock begins running.
For a full picture of gifting strategies, see our gifting strategy guide for 2025/26.
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