The 7-year rule on gifts
Last reviewed 18 August 2026
Giving in good time is the oldest way to lighten an inheritance-tax bill — but the taxman watches the calendar as closely as the donor does.
How the rule works
A gift to another person is a “potentially exempt transfer”. Survive seven years after making it and it falls out of your estate entirely. Die within seven years and it is added back. Crucially, tax only bites once your total gifts in those seven years exceed the £325,000 nil-rate band — below that, the band covers them and no tax is due, however recent.
Taper relief, and the immediate exemptions
Where tax does apply, taper relief reduces it on a sliding scale for gifts made three to seven years before death — but it reduces the tax, not the value of the gift, and only once gifts exceed the nil-rate band. Separately, some gifts are exempt at once and never engage the rule: the £3,000 annual exemption (carry forward one year to £6,000), small gifts of £250 per person, gifts to a spouse or charity, and regular gifts out of surplus income.
Questions
Do I pay tax on a gift if I survive 7 years?+
Does taper relief reduce the gift or the tax?+
Sources. GOV.UK, How Inheritance Tax works: thresholds, rules and allowances (7-year rule, taper relief, annual/small-gift exemptions, normal expenditure out of income).