HMRC Inheritance Tax: Customer Guide
How do I calculate taper relief?
If the total chargeable value of all the gifts made between three and seven years before a death is more than the threshold at death, then taper relief is due. The relief reduces the amount of tax payable on a gift, not the value of the gift itself.
The amount of the taper relief depends on the length of time by which the deceased survived the transfer. The tax charged is reduced by charging the following percentages of the full rate.
| Years between transfer and death | Taper relief % | Proportion of tax payable |
|---|---|---|
| 3 to 4 | 20 | 80 |
| 4 to 5 | 40 | 60 |
| 5 to 6 | 60 | 40 |
| 6 to 7 | 80 | 20 |
Example
- Henry made a gift of £300,000 on 1 February 2002. He died on 20 June 2005.
- The inheritance tax threshold at the date of death was £275,000.
- The gift exceeds the threshold by £25,000
- Full rate of tax on the gift: 40% x £25,000 = £10,000
- The gift is within 3 to 4 years of the death, so taper relief at 20% is due.
- Taper relief: £10,000 x 20% = £2,000
- Revised tax charge: £10,000 - £2,000 = £8,000.
Note
There is an exception to taper relief if the deceased made a chargeable transfer into a discretionary trust less than seven years before death and you are recalculating the tax after the death.
If, after taking into account taper relief, the tax on the death is less
than the tax already charged, then taper relief does not apply and there
is no further tax to pay on the death.
