Taper relief reduces the Inheritance Tax charged on a gift when the person who gave it dies between 3 and 7 years later. The rate falls from 40% in the first 3 years to 32%, 24%, 16% and 8% as each further year passes, reaching nil at 7 years, per gov.uk's rules on giving gifts. The part almost every guide leaves out: taper relief only applies once your gifts in the 7 years before death exceed the £325,000 nil-rate band (2026/27). Below that figure it does nothing at all, because there is no tax for it to reduce. Correct as at 20 August 2026.
What is taper relief?
Taper relief is a reduction in the rate of Inheritance Tax applied to a lifetime gift, based on how long the person survived after making it. It is not a reduction in the value of the gift, and it is not an exemption.
The distinction matters because the two are often confused. A £400,000 gift made 5 years before death is still a £400,000 gift for Inheritance Tax purposes. What changes is the rate charged on the taxable slice of it.
| Years between gift and death | Rate of tax on the gift |
|---|---|
| 0 to 3 years | 40% |
| 3 to 4 years | 32% |
| 4 to 5 years | 24% |
| 5 to 6 years | 16% |
| 6 to 7 years | 8% |
| 7 or more years | 0% |
The 3-to-7-year rows are gov.uk's own table on its gifts guidance page; the first row restates the same page's rule that no taper applies inside 3 years. You will sometimes see the same thing written as a percentage of relief rather than a rate of tax (20%, 40%, 60%, 80%). That is the same arithmetic viewed from the other side, though the consumer guidance does not publish a relief-percentage column.
When does taper relief actually apply?
Only where tax is actually due on the gift itself. That happens when the gift sits above the nil-rate band still available to it, after counting the chargeable gifts made in the 7 years before it. The nil-rate band is £325,000 and is frozen at that level until 5 April 2031 (gov.uk thresholds table).
Here is the mechanism. When someone dies, their lifetime gifts from the previous 7 years are set against the nil-rate band first, in the order they were made, earliest first. Gifts that fit inside the band bear no tax. Only the part that spills over the band is chargeable, and only that part can be tapered.
So for the large majority of estates, where lifetime gifts in the final 7 years come to less than £325,000, taper relief is irrelevant. The gifts are already covered. Surviving 4 years rather than 2 changes nothing, because the tax was nil either way.
Example: taper relief saves nothing
Example. A widow gives £200,000 to her daughter and dies 4 years later, having made no other lifetime gifts. Her gifts in the 7 years before death total £200,000, which is inside the £325,000 nil-rate band. There is no tax on the gift, so there is nothing for taper relief to reduce. Had she died 18 months after making it, the result would have been identical: nil.
The £200,000 does still matter, but in a different way. It has used £200,000 of her nil-rate band, leaving £125,000 of it available to her estate. The cost of the gift shows up in the estate's bill, not the gift's, and taper relief plays no part in that.
Example: taper relief saves real money
Example. A father gives £600,000 to his son and dies 5 years and 3 months later, with no other lifetime gifts and no annual exemptions available. The gift exceeds the nil-rate band, so taper relief is in play.
The nil-rate band of £325,000 is set against the gift, leaving £275,000 chargeable. Five years and 3 months puts the gift in the "5 to 6 years" band, so the rate is 16% rather than 40%. Tax due: £275,000 × 16% = £44,000. Without taper, the same chargeable slice at 40% would have been £110,000. Taper relief saved £66,000.
Note what did and did not happen. The relief did not touch the first £325,000, because no tax was ever charged on it. It reduced the rate on the excess, and only on the excess.
Who pays the tax that taper relief reduces?
Usually the estate. But once someone has given away more than £325,000 in the 7 years before death, the person who received a gift in that period can become liable for the Inheritance Tax on their own gift, as gov.uk's gifts guidance sets out.
This is the practical sting in the tail. A recipient who spent the money years ago can face a bill on it. In the second example above, the son could be looking at the £44,000, not the estate. It is a reason to tell the people you give to that a gift of this size carries a contingent liability for 7 years, rather than leaving them to discover it from a solicitor's letter.
Two things that catch people out
The first is order. Gifts are set against the nil-rate band earliest first, which means an early large gift can consume the whole band and leave a later, smaller gift fully exposed at 40% with no taper at all. A gift made last year can therefore be taxed more heavily than a bigger one made five years ago. Sequencing is not a detail.
The second is the gift with reservation of benefit. If you give something away but keep using it, the classic case being a house you continue to live in rent free, it generally stays in your estate no matter how many years pass. The 7 year clock never starts, so taper relief never becomes relevant. Our guide to the 7 year rule covers how gifts leave your estate in the first place.
What to do now
Work out your running total of gifts over the past 7 years before you make the next one, not after. That single number tells you whether taper relief could ever apply to you, and most people find it cannot.
Keep a record of each gift: what, to whom, the date, and whether an exemption covered it. Your executors will need it, and reconstructing years of giving from bank statements after a death is slow and expensive.
If your gifts are heading past the nil-rate band, the order and timing are worth planning deliberately, and the exemptions that sit outside the 7 year rule entirely are usually the better first move. You can test the estate side of the picture with our Inheritance Tax calculator, and our inheritance tax planning page covers the wider position.
Frequently Asked Questions
No. It applies only where gifts in the 7 years before death exceed the £325,000 nil-rate band (2026/27), and only to the part above it. Below that threshold the gifts are covered by the band, no tax arises, and taper relief has nothing to reduce.
No. It reduces the rate of Inheritance Tax charged on the taxable part of the gift. The gift itself is still counted at its full value when it is set against the nil-rate band.
Tax on the gift runs at 40% for 0 to 3 years, 32% for 3 to 4 years, 24% for 4 to 5 years, 16% for 5 to 6 years, 8% for 6 to 7 years, and nil after 7 years. The figures are published on gov.uk's gifts guidance page.
Gifts into most trusts are chargeable lifetime transfers rather than potentially exempt transfers, so they follow different rules and may attract a lifetime charge when made. Taper can still affect the additional charge on death within 7 years, but the calculation is not the same as for an outright gift to a person. This is a case to take advice on.
Indirectly, yes. Exemptions such as the £3,000 annual exemption and the £250 small gifts exemption take a gift outside the 7 year rule altogether, so those amounts never reach the taper calculation. Using them consistently reduces how much of your giving is ever exposed.
Talk to us before the next large gift
If your lifetime giving is approaching the nil-rate band, or someone has received a gift and wants to know what they might owe, speak to Chloe Symmonds, Senior Manager. The first conversation maps what has already been given against your nil-rate band and shows where the next gift would land. Call 020 8554 2135 or email info@visionconsulting.co.uk, or use our contact page.
By the Vision Consulting team.
This is general information, not advice. Your position depends on your circumstances. Speak to us before acting on anything here.