Free tool
Gift & 7-Year-Rule Timeline
Given away money or assets? See how the 7-year rule and taper relief affect the inheritance tax on the gift, year by year, and how long you need to survive for it to leave your estate entirely.
The gift drops out of your estate entirely after 7 years.
Assumes the gift has the full £325,000 nil-rate band available and is the only gift. Indicative only: multiple gifts and other exemptions change the position.
If you died today
Tax on the gift if death falls in each year band.
- If you died today, the part of the gift above the nil-rate band (£175,000) could attract inheritance tax of about £70,000.
- You are in the first 3 years, where no taper relief applies, so the full 40% is in point. Taper relief only starts after year 3.
- You need to survive 5 more years for this gift to be fully exempt.
- A common myth: taper relief reduces the tax, not the value of the gift, and only where the gift exceeds the nil-rate band. This is an indication only.
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How the 7-year rule works
A gift to another person is a potentially exempt transfer: survive seven years and it leaves your estate completely. Die within seven years and it is added back when working out the inheritance tax, though only the part above your £325,000 nil-rate band is actually taxed.
Taper relief is the most misunderstood part. It reduces the tax on the gift, not the gift itself, and only kicks in after year three: 20% off in years three to four, rising to 80% off in years six to seven. It also only helps where the gift exceeds the nil-rate band. A gift within the band carries no tax anyway, but still uses up your allowance for seven years, quietly increasing the tax on the rest of your estate. This tool gives an indication; the order and size of multiple gifts matters.
Time it right
Gifting is one of the simplest ways to cut inheritance tax, but the timing, the exemptions and the interaction with the rest of your estate need care. We build the plan, on a fixed fee agreed upfront. Book a free clarity call.