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Phil S
Posted: 07 May 2024 17:37:24(UTC)
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I am confused about when taper relief is applicable; is it applicable on all gifts UP TO the £350,000 IHT allowance ( with any gifts over this threshold only becoming tax-exempt after the full 7 years has expired)?

I've looked at various explanations but I think I may misunderstand these rules.

Any input gratefully received
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Newbie
Posted: 07 May 2024 18:26:58(UTC)
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Phil S on 14/05/2024(UTC)
Milo Don
Posted: 07 May 2024 18:27:22(UTC)
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Taper relief is only applied to gifts/transfers ABOVE the IHT threshold of £325k.
Gifts/transfers up to the threshold are simply PETs for 7 years and then fall out of the estate. If you expire before the 7 years are up the full value of PETs up to the threshold are included in the estate.

At least I think that's the case!
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Phil S on 14/05/2024(UTC)
jeffian
Posted: 07 May 2024 22:33:52(UTC)
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Milo Don is absolutely right. It is a commonly held misunderstanding that any gift will get taper relief if the donor dies within 7 years. In fact, the taxman, in his wisdom, has decided that the first £325k of any gift should be applied to your 'nil rate band' and only any amount above that qualify for taper relief. Thus, if you gave away £500k and died 6 years and 364 days from the date of the gift, only £175k would benefit from max taper relief.
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Tim D on 07/05/2024(UTC), Phil S on 14/05/2024(UTC)
Tim D
Posted: 07 May 2024 22:47:14(UTC)
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It's there in black and white on the https://www.gov.uk/inheritance-tax/gifts page:

There's a section on "The 7 year rule" that mentions taper relief, but then
Quote:
Taper relief only applies if the total value of gifts made in the 7 years before you die is over the £325,000 tax-free threshold.
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Phil S on 14/05/2024(UTC)
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