Plain-English answer · England and Wales
What is the seven-year Inheritance Tax rule?
Many outright gifts to individuals fall outside the donor's estate if the donor survives seven years, but the slogan is too simple. Exemptions, earlier gifts, trusts, continued benefit and the order of gifts can all change the result.
A simple example
A parent gives an adult child cash outright and retains no benefit. It may be a potentially exempt transfer. If the parent survives seven years it will generally fall outside IHT. If the parent dies sooner, the gift is included in the calculation and earlier gifts use the nil-rate band first.
Why taper relief is misunderstood
Gifts made between three and seven years before death may qualify for a sliding reduction in tax on the gift. The relief does not reduce the gift when measuring how much nil-rate band has been used. If no tax is due on the gift, there may be nothing to taper.
Important exceptions
The seven-year headline is not a complete plan.
- Some gifts qualify for specific exemptions.
- Transfers into trust can be immediately chargeable.
- A retained benefit can keep an asset relevant.
- Care-funding rules use a different test.
- Capital Gains Tax may still arise.
Official sources
Use these to check the current official position before acting.
This page provides general information only. It is not legal, tax, financial, pension or care-funding advice. Obtain independent advice from appropriately qualified professionals before acting.