IHT Gift and Taper Relief Calculator
This IHT taper relief calculator works out inheritance tax on gifts made in the 7 years before death. Gifts use the £325,000 nil-rate band first, oldest first; only the part above the band is taxed, at 40% within 3 years and at tapered rates of 32%, 24%, 16% and 8% after that. Taper relief reduces the tax, not the value of the gift.
Updated 2026-10-08 · 2026/27 HMRC rates
| Gift (after exemptions) | Years before death | Nil-rate band used | Taxable | Rate | Tax |
|---|---|---|---|---|---|
| £194,000 | 5.5 | £194,000 | £0 | 16% | £0 |
| £244,000 | 3.5 | £131,000 | £113,000 | 32% | £36,160 |
| £438,000 | £325,000 | £36,160 |
| Tax on the gifts without taper relief | £45,200 |
| Taper relief | − £9,040 |
| Tax on the gifts (usually paid by the recipients) | £36,160 |
| Tax on the estate (nil-rate band reduced by the gifts) | £160,000 |
| Total Inheritance Tax | £196,160 |
The bar chart shows the tax on £100,000 of a gift above the nil-rate band, by years between the gift and death. Gifts are taken oldest first; only the part above the nil-rate band is taxed.
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Key facts
- Since 1 April 2025, SDLT on a home in England or Northern Ireland starts at £125,000 (down from £250,000): 2% to £250,000, 5% to £925,000, 10% to £1.5 million and 12% above.
- First-time buyers in England and Northern Ireland pay no SDLT up to £300,000 and 5% on £300,001–£500,000; buy for more than £500,000 and the relief is lost entirely.
- Buying an additional residential property in England or Northern Ireland adds a 5% SDLT surcharge to every band, unless it replaces your main residence and the old one is sold within 36 months.
- Non-UK residents (not present in the UK for at least 183 days in the 12 months before purchase) usually pay a further 2% SDLT surcharge.
- In Scotland, LBTT is 0% up to £145,000 (£175,000 for first-time buyers), then 2%, 5%, 10% and 12% above £750,000.
- Scotland's Additional Dwelling Supplement rose from 6% to 8% of the total purchase price on 5 December 2024.
- In Wales there is no first-time buyer relief: LTT main residential rates start at 6% above £225,000, while higher rates for additional properties start at 5% from the first pound (rising to 17% above £1.5 million) since 11 December 2024.
- The Inheritance Tax nil-rate band of £325,000 and residence nil-rate band of £175,000 are frozen until 5 April 2031, extended by a further year at Budget 2025.
Related
- Inheritance tax calculator
- Residence nil-rate band calculator
- Capital gains tax calculator
- Inheritance tax explained
The seven-year rule for gifts
Most gifts to people are “potentially exempt transfers”. If you live for 7 years after making one, it is outside your estate. If you die within 7 years, the gift is added back and counted for Inheritance Tax. There is no limit on the size of a potentially exempt gift; the risk is only that you die within 7 years.
Gifts into most trusts are different. They are chargeable when made, at the lifetime rate of 20% on the part above the nil-rate band, and can be topped up to 40% if you die within 7 years.
Taper relief rates
If you die between 3 and 7 years after a gift, taper relief reduces the tax on it. HMRC’s manual describes it as a reduction in the tax charged: the tax is 80%, 60%, 40% or 20% of the full 40% charge. It is not a reduction in the value of the gift, so the gift still uses the full amount of the nil-rate band.
| Years between gift and death | Tax rate on the gift | Taper relief | Tax on £100,000 above the band |
|---|---|---|---|
| Less than 3 | 40% | None | £40,000 |
| 3 to 4 | 32% | 20% of the tax | £32,000 |
| 4 to 5 | 24% | 40% of the tax | £24,000 |
| 5 to 6 | 16% | 60% of the tax | £16,000 |
| 6 to 7 | 8% | 80% of the tax | £8,000 |
| 7 or more | 0% | 100% of the tax | £0 |
Gifts use the nil-rate band first, oldest first
Gifts made in the 7 years before death are set against the £325,000 nil-rate band before the estate is, starting with the oldest. Only the part of a gift above the band is taxed, and only that part benefits from taper relief.
Example: a £200,000 gift six and a half years before death, then £250,000 three and a half years before. The first gift uses £200,000 of the band and pays no tax. The second gift has £125,000 of band left, so £125,000 is taxable at 32%: £40,000, instead of £50,000 without taper relief. The estate then has no nil-rate band left, only any residence nil-rate band.
Why taper relief often saves nothing
A common mistake is to assume a gift becomes partly tax-free after 3 years. If your gifts in the 7 years total less than £325,000, there is no tax on them to reduce. A £300,000 gift five years before death pays £0 of tax itself, but it uses £300,000 of the nil-rate band.
The cost shows up in the estate instead. A £600,000 estate with no gifts pays £110,000; after that gift it pays £230,000, because only £25,000 of the band is left. Taper relief never helps the estate, only the tax on the gift itself. The residence nil-rate band is not used by gifts.
Gifts that are exempt straight away
The calculator can deduct the annual exemption for the year of the gift and the year before. Enter the other exemptions by reducing the gift value yourself.
- The annual exemption: £3,000 of gifts each tax year, plus last year’s if it was unused (carried forward one year only).
- Small gifts of up to £250 per person each tax year, if no other exemption is used on that person.
- Wedding or civil partnership gifts: up to £5,000 to a child, £2,500 to a grandchild or great-grandchild, £1,000 to anyone else.
- Regular gifts out of surplus income, such as paying into a grandchild’s savings each month, if you can afford them after normal living costs. There is no cash limit, but keep records.
- Gifts to a spouse or civil partner who is a long-term UK resident, and gifts to charities and political parties.
Who pays, grossing up and gifts with reservation
Tax on a gift that fails because of death within 7 years is normally paid by the person who received it. The executors report all gifts in the 7 years on form IHT403 with the IHT400, so keep a record of what you give and when.
When the giver pays the tax on a lifetime gift into trust, the gift is grossed up, because the tax itself is part of the loss to the estate. At the 20% lifetime rate that means tax of 25% of the net excess: a £425,000 gift with the donor paying is £100,000 over the band, grossed up to £125,000, with tax of £25,000.
A gift with reservation, such as giving your home to your children but carrying on living in it without paying market rent, is treated as still yours and stays in your estate however long you live.
Business and farm property given away from 30 October 2024 can be affected by the April 2026 relief changes if the giver dies on or after 6 April 2026; the £2,500,000 100% relief allowance has to be shared with gifts made in the 7 years before death.
Frequently asked questions
Does taper relief apply to all gifts?
No. It only reduces tax on gifts above the nil-rate band made 3 to 7 years before death. If total gifts in the 7 years are under £325,000, there is no tax on them to reduce, although they still use up the band.
Does taper relief reduce the value of the gift?
No. It reduces the tax on the part of the gift above the nil-rate band. The full gift value still uses up the nil-rate band.
What is the 7-year rule for inheritance tax?
Gifts to individuals are free of Inheritance Tax if you live 7 years after making them. Die within 7 years and they count towards your estate, with taper relief from year 3.
How much can I gift tax-free each year?
£3,000 a year, plus £250 small gifts to other people, wedding gifts and regular gifts from surplus income. Larger gifts are fine too if you survive 7 years.
Who pays inheritance tax on a gift?
Usually the person who received the gift, if tax is due on it. Tax on the rest of the estate is paid by the executors.
Do gifts use up the residence nil rate band?
No. Gifts only use the ordinary nil-rate band. The residence band is only available on death, for a home left to direct descendants.
Sources
Figures are taken from official government publications and were last reviewed on 2026-10-08.
- GOV.UK – SDLT: residential property rates
- Revenue Scotland – LBTT residential property
- Revenue Scotland – Additional Dwelling Supplement
- Welsh Government – LTT rates and bands
- GOV.UK – Inheritance Tax
- GOV.UK – IHT: passing on a home
- GOV.UK: Inheritance Tax – rules on giving gifts
- Budget 2025 – Overview of tax legislation and rates
- GOV.UK – Inheritance Tax residence nil rate band
- GOV.UK: Work out Inheritance Tax due on gifts
- HMRC: Inheritance Tax Manual IHTM14612 – taper relief
- HMRC: Agricultural property relief and business property relief changes
- HMRC – Technical note: Inheritance Tax on pensions
- HMRC – Interest rates for late and early payments
- legislation.gov.uk – Finance Act 2026
- HMRC: Inheritance Tax Manual IHTM14544 – grossing up lifetime transfers
Reviewed by Kashif Nazir Khan on 2026-10-08 · software engineer and developer with an interest in accounting and taxation