What is the 7-year rule for inheritance tax?
The 7-year rule means that most gifts you make in your lifetime become free of inheritance tax if you live for seven years afterwards. If you die within seven years, the gift may count against your estate. Taper relief can reduce the tax on gifts made between three and seven years before death — but taper only reduces tax that is actually due above the nil-rate band.
Detailed explanation
It's the cornerstone of lifetime gifting. Give it away, survive seven years, and it's outside your estate.
- 0–3 years before death: full 40% may apply to the gift (above allowances).
- 3–7 years: taper relief reduces the tax due on a sliding scale.
- 7+ years: the gift is fully exempt.
Separate exemptions also exist: a £3,000 annual gift allowance, small gifts of up to £250 per person, and gifts out of surplus income.
Margaret gifts £100,000 to her son and lives another eight years. Because she survived seven years, the gift is completely outside her estate for inheritance tax. Had she died after four years, taper relief would have reduced (not removed) any tax due above her nil-rate band.
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Sources
- GOV.UK — How Inheritance Tax works (gifts and the 7-year rule)
- GOV.UK — Rules on giving gifts (annual and small-gift exemptions)
- HMRC — Inheritance Tax manual: potentially exempt transfers
- Reviewed by
- ClearLegacy editorial team
- Last reviewed
- June 2026
- Next review
- December 2026
- Jurisdiction
- England & Wales
Frequently asked questions
What is the 7-year rule for inheritance tax?
Most lifetime gifts are free of inheritance tax if you survive seven years after making them. If you die within seven years, the gift may be brought back into your estate, though taper relief can reduce the tax on gifts made three to seven years before death.
Does taper relief reduce the value of the gift?
No — taper relief reduces the inheritance tax payable on a gift, not the gift's value, and only where tax is actually due (above the nil-rate band). Many gifts within the nil-rate band see no benefit from taper.
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