Last updated: 14 October 2026
Is inheritance tax due on a gift made by someone who has died?
It can be. If the person who died made a gift in the 7 years before their death, the gift is added back when inheritance tax (IHT) is worked out. Gifts are set against the £325,000 nil-rate band first, in date order. If the total of the gifts is more than the nil-rate band, the person who received the gift may have to pay IHT on the excess, reduced by taper relief if the gift was made more than 3 years before death.
Who pays the tax on a failed gift?
- The recipient is primarily liable for IHT on a gift that becomes chargeable because the donor died within 7 years
- The estate pays if the recipient doesn’t pay within 12 months of the end of the month of death
- Gifts within the nil-rate band don’t create tax on the gift, but they reduce the nil-rate band left for the rest of the estate
Taper relief
Taper relief reduces the tax on the gift, not the value of the gift. It only helps if the gifts are worth more than the nil-rate band.
| Years before death | Rate on the gift above the nil-rate band |
| 0 to 3 | 40% |
| 3 to 4 | 32% |
| 4 to 5 | 24% |
| 5 to 6 | 16% |
| 6 to 7 | 8% |
| 7 or more | 0% (exempt) |
Example
Robert gave his daughter £425,000 in cash and died 4½ years later. He had made no other gifts.
- Gift £425,000, less two years’ annual exemptions (£6,000) = £419,000
- Less the £325,000 nil-rate band = £94,000 taxable
- Tax at the 24% taper rate: £22,560, payable by his daughter
- The rest of Robert’s estate has no nil-rate band left, so it is taxed at 40%, subject to any residence nil-rate band
Exemptions that still apply
Some gifts don’t count, even within 7 years:
- the £3,000 annual exemption for that year and the previous year
- small gifts of up to £250 per person
- wedding gifts up to the limits
- gifts to a spouse, civil partner or charity
- regular gifts out of surplus income; see gifting money to reduce IHT
The 14-year shadow
Gifts into trusts (chargeable lifetime transfers) made in the 7 years before a later gift can affect how much nil-rate band that later gift gets. Executors may therefore need to look back as far as 14 years.
What executors must do
- Ask the family about every gift made in the last 7 years, and 14 years for trusts
2. Gather bank statements and records
3. Report gifts on form IHT403 with the IHT400
4. Tell recipients if they owe tax on their gift
Frequently asked questions
Do I have to pay IHT on a gift my mum gave me?
Only if she died within 7 years and her gifts were worth more than the nil-rate band.
Does taper relief reduce the gift’s value?
No. It reduces the tax rate on the part above the nil-rate band.
What if the gifted asset has fallen in value?
Fall in value relief may reduce the tax.
Is life insurance worth taking out?
A 7-year gift inter vivos policy can cover the potential tax.
Related: can gifting your home reduce IHT and cohabiting couples and IHT.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with inheritance tax on lifetime gifts. See our inheritance tax planning service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
