Gifting and the 7-Year Rule

Gifts made more than seven years before death are usually exempt from inheritance tax. Gifts within seven years are called potentially exempt transfers (PETs) and may be taxed if you die before the seven-year period expires.

Taper relief reduces the IHT on gifts made between three and seven years before death: 20% tax reduction at year 3–4, 40% at years 4–5, 60% at years 5–6, and 80% at years 6–7. Annual gift exemptions of £3,000 per year fall outside these rules entirely.

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