How gifts and the 7-year rule work
Most gifts you make are Potentially Exempt Transfers (PETs) — completely free of Inheritance Tax if you live for 7 years after making them. If you die within 7 years, the gift counts against your £325,000 nil-rate band first; only the part above it can be taxed, at up to 40%.
Taper relief
If tax is due and you survived at least 3 years, taper relief reduces it:
| Years survived | Tax rate on the excess |
|---|---|
| 0–3 years | 40% |
| 3–4 years | 32% |
| 4–5 years | 24% |
| 5–6 years | 16% |
| 6–7 years | 8% |
| 7+ years | 0% (exempt) |
Example: £400,000 gift, died 4–5 years later
After the £3,000 exemption and £325,000 nil-rate band, £72,000 is taxable. At 4–5 years the rate is 24%, so the tax is about £17,280.
What is a PET?
A Potentially Exempt Transfer — a gift that becomes fully exempt if you survive 7 years, but may be taxed if you don't.
Who pays the tax?
Usually the person who received the gift, if the giver dies within 7 years and the gift is taxable.
More United Kingdom calculators
This calculator provides a simplified estimate for the 2026/27 tax year based on published HMRC rules and is for general information only — it is not financial, tax or legal advice. It doesn't model multiple gifts, the residence nil-rate band or exemptions beyond the £3,000 annual exemption. See GOV.UK. Source: GOV.UK (Inheritance Tax on gifts).