Taper relief reduces the inheritance tax (IHT) payable on gifts made between 3 and 7 years before death. It does not reduce the value of the gift — it reduces the tax rate applied. Taper relief only applies where the gift exceeds the available nil-rate band (£325,000 in 2026/27).
Taper Relief Percentages
| Years Between Gift and Death | IHT Rate | Relief Applied |
|---|---|---|
| 0–3 years | 40% | 0% |
| 3–4 years | 32% | 20% |
| 4–5 years | 24% | 40% |
| 5–6 years | 16% | 60% |
| 6–7 years | 8% | 80% |
| 7+ years | 0% | Fully exempt |
Worked Example
Margaret has an estate of £900,000. In May 2020 she gifted £450,000 to her son. She dies in October 2025 (5.5 years later).
- Gift: £450,000 – £325,000 NRB = £125,000 chargeable
- Full rate IHT: £125,000 × 40% = £50,000
- Taper relief 60%: reduces to £20,000 IHT on the gift
- Remaining estate £450,000 (NRB used): £450,000 × 40% = £180,000
- Total IHT: £200,000
Important Caveat
Taper relief only helps where gifts exceed £325,000. If the gift is within the nil-rate band, no IHT is due on it anyway and taper relief provides no additional benefit.
Other IHT Exemptions
- Annual exemption — £3,000/year gifted free of IHT
- Small gifts — up to £250 per person per year
- Wedding gifts — £5,000 to a child, £2,500 to a grandchild
- Normal expenditure out of income — regular gifts from surplus income are immediately exempt
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Inheritance tax rules can change. Always seek advice from a qualified financial adviser or solicitor.