Inheritance Tax on Gifts Calculator
See which lifetime gifts fall back into the estate under the 7-year rule, how they use up the £325,000 nil-rate band, the tax on each gift after taper relief, and what that leaves for the estate.
Last updated: October 2026 · 2026/27 rates
Gifts made before death
Leave out gifts of £250 or less per person per tax year, and regular gifts out of surplus income: they are exempt. Each tax year's £3,000 annual exemption can only be used once, so do not apply it to two gifts in the same year.
Everything left at death, after debts and funeral costs, not counting the gifts.
Tax on gifts (paid by recipients)
£28,360.00
Tax on the estate
£50,000.00
£50,000 more than without the gifts
Nil-rate band left for the estate
£0
of £325,000, after £325,000 used by gifts
Gift by gift, oldest first
Failed gifts use the nil-rate band in the order they were made.
| Gift | Exemptions | Chargeable | Nil-rate band used | Above band | Taper: tax payable | Tax |
|---|---|---|---|---|---|---|
| £425,000 to child, 4.5 years beforeFailed PET: counts against the estate | £6,000 | £419,000 | £325,000 | £94,000 | 60% | £22,560.00 |
| £20,000 to grandchild or great-grandchild, 2 years beforeFailed PET: counts against the estate | £5,500 | £14,500 | £0 | £14,500 | 100% | £5,800.00 |
| Estate: £300,000 less £0 nil-rate band and £175,000 residence band, £125,000 at 40% | £50,000.00 | |||||
| Total Inheritance Tax | £78,360.00 | |||||
How the 7-year rule works
An outright gift to a person is a potentially exempt transfer (PET). If you live for 7 years after making it, it drops out of the Inheritance Tax calculation completely. If you die sooner, the PET "fails" and is added back. Failed gifts are set against the £325,000 nil-rate band first, in the order they were made, oldest first. Only the part of a gift above the band is taxed, at 40%, and the person who received it pays.
Because the gifts take the nil-rate band first, the estate gets whatever is left. That is the knock-on effect people miss: a large gift three years before death can leave the estate with no nil-rate band, so the estate pays 40% on almost everything.
Worked example: a parent gives a child £425,000 four and a half years before dying, using this year's and last year's annual exemptions (£6,000). The chargeable gift is £419,000. The first £325,000 uses the whole nil-rate band, leaving £94,000 above it. Tax at 40% would be £37,600, but the gift was made between 4 and 5 years before death, so only 60% is payable: £22,560. The estate's nil-rate band is fully used.
Taper relief reduces the tax on a failed gift made more than 3 years before death. It reduces the tax, not the value of the gift, so it only helps when the gift is above the nil-rate band. A gift that fits inside the band has no tax to taper, but it still uses up the band.
| Years between gift and death | Share of tax payable | Effective rate |
|---|---|---|
| Up to 3 years | 100% | 40% |
| 3 to 4 years | 80% | 32% |
| 4 to 5 years | 60% | 24% |
| 5 to 6 years | 40% | 16% |
| 6 to 7 years | 20% | 8% |
| 7 years or more | 0% | 0% |
What is the 7-year rule for gifts?
Outright gifts to people are free of Inheritance Tax if the giver lives for 7 years after making them. If the giver dies sooner, the gift is added back and uses up the £325,000 nil-rate band before the estate does, oldest gift first.
How does taper relief work on gifts?
Taper relief cuts the tax on the part of a gift above the nil-rate band when the gift was made more than 3 years before death. The rate on the gift falls from 40% to: 3 to 4 years 32%, 4 to 5 years 24%, 5 to 6 years 16%, 6 to 7 years 8%. It reduces the tax, not the value of the gift, so a gift within the nil-rate band gets no benefit.
Who pays inheritance tax on a gift?
The person who received the gift pays the tax on any part of it above the nil-rate band. The estate pays tax on what is left at death, and because the gifts used the nil-rate band first, the estate may have little or none left.
How much can I give away each year without inheritance tax?
You can give £3,000 a year under the annual exemption, plus last year's if you did not use it (so £6,000). On top of that: unlimited gifts of up to £250 per person, wedding gifts of up to £5,000 to a child, £2,500 to a grandchild and £1,000 to anyone else, and regular gifts out of surplus income.
What does a £425,000 gift cost if I die 4.5 years later?
After two annual exemptions the chargeable gift is £419,000. £325,000 is covered by the nil-rate band and £94,000 is taxed. At 40% that would be £37,600, but taper relief for 4 to 5 years means 60% is payable: £22,560. The estate then has no nil-rate band left.
Are gifts to my spouse or a charity taxed?
No. Gifts to a spouse or civil partner who lives permanently in the UK are exempt, and so are gifts to charities and political parties. They do not use the nil-rate band.
Outright gifts by individuals only. Assumes no gifts into trust in the 7 years before the earliest gift, no transferred nil-rate band, and a home worth at least the residence nil-rate band when that box is ticked (with the taper above £2,000,000). This calculator is a guide, not tax advice.
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This calculator is part of a family. The main calculator covers the general case.
Main calculator: Inheritance Tax Calculator
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Reviewed by Alexandre Bernier, LLM (UK), CFP®
Educational tool: estimates only. Not individual financial, investment, tax or legal advice. Using it does not create an adviser-client relationship. Rules and figures change; check them against current HMRC and GOV.UK guidance and speak to a qualified professional. Editorial policy →
Sources
Every rate and threshold used by this calculator is taken from the official pages below. If a figure here disagrees with one of these, the official page is right, please tell us.