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If there is any Inheritance Tax to pay on gifts you make during your lifetime, it is charged at 40% on gifts given in the 3 years before you die. 
Gifts made 3 to 7 years before your death are taxed on a reducing, sliding scale known as ‘taper relief’. 
Years between gift and death 
Tax paid 
less than 3 
3 to 4 
4 to 5 
5 to 6 
6 to 7 
7 or more 
Example reproduced from GOV.UK website: 
Sally died on 1 July 2018. She was not married or in a civil partnership when she died. 
Sally left 3 gifts in the 7 years before her death: 
£300,000 to her brother 6.5 years before her death 
£50,000 to her sister 4.5 years before her death 
£150,000 to her friend 3.5 years before her death 
Sally is not entitled to any other gift exemptions or reliefs. 
There is a £325,000 inheritance tax threshold. Anything below this amount is tax free. 
£300,000 is used up by the gift Sally gave her brother. There is no tax to pay on his gift. 
The remaining £25,000 is used up by her £50,000 gift to her sister. There’s tax to pay on the amount not covered by the threshold. That means there’s tax to pay on £25,000 of the gift to Sally’s sister at a rate of 24%. 
The £150,000 gift given to her friend is taxed at a rate of 32%. 
Sally’s remaining estate was valued at £500,000 and charged at the usual 40% inheritance tax rate. Sally used up the tax-free threshold on gifts given before her death. 
Gifts are not counted towards the value of your estate after 7 years. 
Tagged as: inheritence
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