IHT taper relief reduces the inheritance tax (IHT) charged on lifetime gifts when the person who made them dies between three and seven years later. It works on a sliding scale: the longer the gap between the gift and death, the lower the tax rate. This article explains how the relief works, how to calculate any savings, and what executors need to do.
Why does IHT taper relief exist?
The Government wants to prevent people from avoiding IHT by giving away large sums shortly before they die. At the same time, it recognises that gifts made many years earlier should not attract the full 40 per cent rate. Taper relief addresses both concerns. It leaves the full rate in place for very recent gifts, then reduces it progressively the further the gift is from the date of death.
The seven-year rule and how taper relief fits in
When someone gives away money, property or other assets, that gift is known as a potentially exempt transfer (PET). If the person survives seven years from the date of the gift, it falls entirely outside their estate for IHT. If they die within seven years, the gift comes back into the estate and may be taxed.
Taper relief then applies, but only if both conditions are met:
- The cumulative total of lifetime gifts exceeds the nil-rate band, which is £325,000 for the 2026/27 tax year and is frozen at that level until 5 April 2031. This is the point most guides get wrong. It is not each gift taken on its own: the band is set against lifetime transfers in date order, so an earlier gift can absorb it and push a later, smaller gift into charge.
- Death occurs more than three years after the gift was made, but within seven years.
How the sliding scale works
IHT taper relief does not reduce the value of the gift itself. It reduces the tax rate charged on any part of the gift that exceeds the nil-rate band. Here is the scale for the 2026/27 tax year:
| Years between gift and death | Effective IHT rate |
|---|---|
| 0 to 3 years | 40% (no relief) |
| 3 to 4 years | 32% |
| 4 to 5 years | 24% |
| 5 to 6 years | 16% |
| 6 to 7 years | 8% |
| 7 years or more | 0% |
Our guide to potentially exempt transfers sets out the same scale the other way round, as the percentage reduction in the tax charge: 20 per cent in the three-to-four year band, then 40, 60 and 80 per cent. Both describe exactly the same relief: an 80 per cent reduction leaves 20 per cent of the 40 per cent rate payable, which is the 8 per cent shown above.
Chargeable lifetime transfers, such as gifts into most trusts, work differently and are often described incorrectly. There is no 20 per cent starting rate for taper. If the donor dies within seven years, the transfer is recalculated at the full death rate of 40 per cent, taper relief is applied to that figure, and credit is then given for the 20 per cent lifetime tax already paid when the gift entered the trust. If the recalculated figure comes out lower than the lifetime tax already paid, nothing is refunded.
Does taper relief apply to property?
Yes. If someone gives away a second home or rental property and then dies between three and seven years later, the gift is added back into their estate and the sliding IHT rates apply. HMRC uses the property’s open-market value on the day it was given away, and taper relief can then reduce the tax rate on any part of that value exceeding the nil-rate band.
To count as a genuine gift for IHT, the donor must give up all benefit. If they continue living in the property or using it without paying full market rent, HMRC treats them as still owning it. The full value is then taxed as part of the estate, and taper relief is lost entirely. HMRC does allow genuinely minor continued use: stays of not more than two weeks a year in the donee’s absence, or less than a month a year where the donee is also there, will not usually trigger a reservation of benefit. Because gifting property can also trigger Capital Gains Tax at the point of transfer, it is wise to take professional advice before proceeding.
You can request a free legal consultation or obtain a quote for probate legal support through The Probate Network.
Worked examples
Example 1: Ravi
Ravi gave his daughter £425,000 and died four years and three months later.
- The first £325,000 uses the nil-rate band: no IHT.
- The remaining £100,000 is taxable.
- Because Ravi died between four and five years after the gift, the rate is 24 per cent.
- Tax due: £24,000. Without taper relief, it would have been £40,000.
Example 2: Aisha
Aisha gifted £600,000 to her son and died six years and two months later.
- Nil-rate band: £325,000.
- Taxable balance: £275,000.
- The six-to-seven-year band gives an 8 per cent rate.
- Tax due: £22,000 instead of £110,000 at the full 40 per cent.
These figures show how significant the relief can be, particularly for larger gifts that tip over the nil-rate band.
For personalised guidance, review your legal advice options.
Common misunderstandings about IHT taper relief
- It does not apply to small gifts. Gifts within the annual exemption (£3,000 per tax year) and other standard exemptions are already free of IHT. Taper relief has no role to play there.
- It never reduces IHT on the estate itself. The relief applies only to lifetime gifts that become chargeable on death.
- It does not change the nil-rate band. Even with taper relief in play, gifts still use up the nil-rate band first.
How to claim taper relief
Executors or personal representatives must complete form IHT400 and its supplementary pages. Gifts go on form IHT403, the schedule filed alongside the IHT400, where each gift is listed with its date, its value and any relief claimed. HMRC then applies the correct tapered rate. IHT403 was revised on 6 April 2026 for the agricultural and business relief changes, with a further wording fix at question 12 on 22 June 2026, so make sure you are working from the current version.
Accurate records are essential. Gather the following before submitting the return:
- Bank statements and legal documents showing when gifts were made and their value.
- Evidence of any IHT already paid on chargeable lifetime transfers.
- Professional valuations for property or shares given away.
If you are uncertain about any of this, speak to a solicitor or tax adviser with experience in probate and inheritance tax.
Practical steps for families and executors
Lifetime planning can make a real difference to the final tax bill.
- Keep detailed records of all gifts above £250 made to any one person in a tax year.
- Use the annual exemption and the small-gifts exemption to avoid unnecessary tax.
- Review existing gifts if circumstances change; professional guidance can help clarify potential liabilities.
- Consider a term life insurance policy written in trust to cover any IHT that might arise within seven years of a gift.
Clear paperwork now can prevent a larger tax bill and additional complexity for those who deal with the estate later.
Get help with IHT and probate
The Probate Network connects executors and families with qualified professionals who can advise on IHT taper relief, probate forms and all aspects of estate administration. You can book a free legal consultation at any point.
Frequently asked questions
What is IHT taper relief?
IHT taper relief reduces the rate of inheritance tax charged on lifetime gifts when the person who made them dies between three and seven years after the gift. It applies on a sliding scale, from 32 per cent in the three-to-four year band down to 8 per cent in the six-to-seven year band. Gifts made more than seven years before death attract no IHT at all.
Does taper relief reduce the value of a gift for IHT purposes?
No. Taper relief reduces the tax rate applied to the gift, not the gift’s value. In addition, it only applies to the portion of the cumulative lifetime gifts that exceeds the nil-rate band (£325,000 in 2026/27), taking those gifts in date order. If the total value of gifts made in the seven years before death stays within the nil-rate band, taper relief makes no practical difference.
Can taper relief apply to a gift of property?
Yes, provided the donor gave up all benefit in the property at the time of the gift. If the donor continued to live in the property rent-free, HMRC treats it as a “gift with reservation of benefit” and includes the full value in the estate, removing any entitlement to taper relief. A full market rent must have been paid for the gift to stand, though HMRC does permit genuinely minor continued use, such as short stays of no more than two weeks a year in the donee’s absence.
How do executors claim taper relief?
Executors claim taper relief through form IHT400 and its supplementary pages. They list each lifetime gift with its date and value, and HMRC applies the appropriate tapered rate. Good records, including bank statements, legal documents and professional valuations where relevant, are essential to support the claim.
This article is for general guidance only and does not constitute legal, tax or financial advice. Rules and thresholds can change and every estate is different. For advice on your own circumstances, speak to a qualified professional. You can book a free legal consultation through The Probate Network.
