What is Taper Relief?
To avoid paying IHT on cash within your estate, gifting money to your beneficiaries during your lifetime can sometimes be an advisable thing to do. However, if you fail to survive seven years from the date of these gifts, the value will still be considered part of your estate by HMRC.
If you die between three and seven years after making a gift, the amount of IHT payable by your estate will be reduced on a sliding scale, known as ‘Taper Relief’. However, this “relief” is not quite as it seems.
Years between gift and death | Tax paid |
Less than 3 | 40% |
3 to 4 | 32% |
4 to 5 | 24% |
5 to 6 | 16% |
6 to 7 | 8% |
7 or more | 0% |
The table above shows the reduction in IHT tax that would otherwise be payable on the transfer.
Taper Relief doesn’t reduce the value of the gift transferred – it only reduces the tax payable.
For tax advice, consult a qualified accountant.
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