Mark McLaughlin looks at how and when inheritance tax taper relief can apply.
Many individuals without much knowledge of inheritance tax (IHT) will nevertheless be aware of a ‘seven-year rule’ for escaping IHT on lifetime gifts.
The seven-year rule
In broad terms, the ‘seven-year rule’ is shorthand for the general principle that if (for example) a parent gifts an asset to their adult child, the gift is a ‘potentially exempt transfer’ (PET), which normally becomes exempt from IHT if the parent survives for at least seven years after making the gift. A seven-year period is also relevant to ‘chargeable lifetime transfers’ (CLTs). If the parent had instead gifted the asset to a discretionary trust, the gift would be taxed in the first instance at 20% to the extent that the IHT nil-rate band (£325,000 for 2025/26) was
