Inheritance Tax Planning

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Inheritance Tax and the 7 Year rule

There is a way that you can give your whole estate away and pay no tax at all. This way has been a managed way of passing large estates down the generations by wealthy families for centuries. This type of transfer is known as a "Potentially Exempt Transfer" or a PET.

In short, wealthy families who have large estates would plan to pass the whole estate onto one or two heirs, typically eldest son or daughter. This would normally take place when the son or daughter was over twenty one.

Now as long as the parents survived a period of 7 years there would be no tax whatsoever due on that part of the gifted estate. This rule is known as Taper relief.

It is important to bear in mind that when making a large gift it has to be in excess of the nil rate band to benefit from any potential reduction in the potential tax due as a result of the taper relief..

In addition it is also important to be aware that any gift made essentially uses up the nil rate band and could push the remaining estate into a full rate of tax with no relief at all for the subsequent 7 years.

So for example if you use the figure of £320,000 as a guide for the nil rate band and you pass £400,000 over as a gift then £320,000 of that amount will be taxed at nil rate and £80,000 will potentially be taxed at the rate calculated below depending on when death occurs after the gift is made.

However if there is any money left in the estate this will now be taxed in full for the next 7 years as the nil rate band has been passed with the gift.

It has to be said it is very complicated and this is why you need a specialist to assist you in effectively planning for it correctly.

That said if the individual making the gift dies during the 7 years and the gift was sufficient to exhaust the nil rate band tax should be due according to the calculation below :-

If death occurs within the first 3 years after the transfer there will be 100% of the tax due.

If death occurs between years 3 and 4 then only 80% of the tax will be due

If death occurs between years 4 and 5 then only 60% of the tax will be due

If death occurs between years 5 and 6 then only 40% of the tax will be due

Finally if death occurs between years 6 and 7 only 20% of the tax would be due.

So in summary the tax is still 40% but depending on the year of death after the transfer is made anything from 100% of that 40% to 20% of the 40% may be due, and then obviously if you survive the 7 years then no tax is due at all.

Do not think for one minute that you have to be a wealthy land owner to benefit from the 7 year rule because you don't all you have to have is an estate that carries a potential tax bill and the rest is just good tax planning.

Please take the time to use our calculator below to determine how much tax would be due on a PET after a certain period of time.

Please note that this calculator is only a guide and in no way guarantees the amount of tax that will be due on and potentially exempt transfer. That said it will give you an indication of the amount of tax that should be due. You will need to know what tax would be due at outset in order to calculate the tax due after time.

7 Year Rule Calculator

Potential tax due £
If death occurs, the number of years since transfer   
Total gross estate £

IHT Calculator

Use our FREE tool to estimate the inheritance tax liability be due on your estate.

Glossary of Terms

Baffled by all the jargon? Then why not use our glossary to make things easier!


This section covers the various gifts available to you to utilise the tax free benefits open to you.


Here you will find all the exemptions which may enable you to pass on parts of your estate free of any inheritance tax.

The 7 Year Rule

Gift any part of your estate outside those allowable will create a potentially exempt transfer find out how you stand under the tax laws.

IHT relief's

There are certain relief's that like the exemptions allow for transfer to people without tax this section covers those.