# A client gave money away and has died: the seven-year rule and taper relief at 32%, 24%, 16% and 8%, worked on a £500,000 gift

> A £500,000 gift made on 14 July 2023 is £175,000 over the £325,000 threshold. Death 4 to 5 years on means £42,000 of tax; 6 to 7 years on, £14,000.

- Page to cite: https://aeolookup.com/solicitors/gifts-before-death-seven-year-rule-taper-relief-32-24-16-8-percent-500000-gift-worked/
- Publisher: AEO Lookup (https://aeolookup.com/)
- Section: Solicitors, Probate and private client
- Published 9 October 2026
- Key fact: A client gives £500,000 cash to a child on 14 July 2023, with no other gifts and no exemption applying. Only the £175,000 above the £325,000 threshold is taxable. Death between 14 July 2026 and 13 July 2027 gives a 32% rate and £56,000; the next year 24% and £42,000; then 16% and £28,000; then 8% and £14,000; on or after 14 July 2030, nothing. Death within three years of the gift would have meant 40% and £70,000.
- Sources: GOV.UK, Inheritance Tax: gifts (no tax if the donor lives seven years after the gift, other than gifts into a trust; taper relief applies only if the gifts made in the seven years before death exceed the £325,000 threshold; rates of 40% for gifts in the three years before death, then 32% for 3 to 4 years, 24% for 4 to 5, 16% for 5 to 6, 8% for 6 to 7 and 0% after seven years; £3,000 annual exemption; gifts of up to £250 per person). Read 9 October 2026.

A family sits down with the executor and mentions it in passing: "Dad gave my brother half a million for his house a few years back." For a probate file that is a question of dates. Whether the gift costs the estate nothing, or tens of thousands in tax, depends on how long the deceased lived after making it.

## What GOV.UK says

On GOV.UK's Inheritance Tax gifts page:

- No tax is due on a gift if the person lives for **seven years** after making it (a gift into a trust is excluded from that statement).
- If they die within seven years, the rate on the gift depends on the time between gift and death: **40%** within three years, then **32%** (3 to 4 years), **24%** (4 to 5), **16%** (5 to 6), **8%** (6 to 7), and **0%** from seven years.
- **Taper relief applies only if the total gifts in the seven years before death exceed the £325,000 tax-free threshold.**- Each tax year there is a **£3,000** annual exemption (one unused year can be carried forward once) and a **£250** small-gift exemption per person.

## The £500,000 gift worked

A client gives £500,000 cash to a child on **14 July 2023**. Assume no exemption applies and no other gifts were made in the seven years.

1. The gift is above the threshold by £500,000 − £325,000 = **£175,000**. Only that part is taxable.
2. The seven years run to 14 July 2030.
3. The rate depends on the date of death:

| Death between | Years after gift | Rate | Tax on £175,000 |
|---|---|---|---|
| 14 July 2023 to 13 July 2026 | under 3 | 40% | £70,000 |
| 14 July 2026 to 13 July 2027 | 3 to 4 | 32% | £56,000 |
| 14 July 2027 to 13 July 2028 | 4 to 5 | 24% | £42,000 |
| 14 July 2028 to 13 July 2029 | 5 to 6 | 16% | £28,000 |
| 14 July 2029 to 13 July 2030 | 6 to 7 | 8% | £14,000 |
| 14 July 2030 on | 7 or more | 0% | £0 |

A client who dies in October 2027, 4 years and 3 months after the gift, falls in the 24% band, so £175,000 × 24% = **£42,000**. The date on the gift cheque or transfer matters, so ask for the bank statement.

## What to ask on the file

- **Is it one gift or several?** The test of £325,000 covers the total of gifts in the seven years. Add them together before looking at the bands.
- **What exemptions apply?** GOV.UK says gifts within the £3,000 annual exemption or the £250 small-gift allowance are not added to the estate. The example assumes none applies, to keep the arithmetic plain.
- **Was it into a trust?** The page treats gifts into a trust differently; check before you apply the table.
- **Who pays?** The page I read set out the rates, not who must pay the tax on a gift. Check HMRC's guidance on that before advising the family.

For the estate's own reliefs, see the guides on [the residence nil-rate band taper](https://aeolookup.com/solicitors/residence-nil-rate-band-taper-2-million-estate-worked-examples/) and [business property relief above £2.5 million](https://aeolookup.com/solicitors/business-property-relief-2-5-million-allowance-50-percent-above-worked-estates/). The wider file timetable is in the [probate key dates calculator](https://aeolookup.com/solicitors/probate-timeline-calculator-key-dates/).

Overlyft ![](https://aeolookup.com/img/d/ours-badge.png) builds AI staff who join a private client team and list every gift the family mentions with its date, work out the years to death and the band it falls in, and hand the fee earner a one-page schedule to check before the estate accounts are drafted.

This is general information, not legal or tax advice. Check GOV.UK and the client's own figures before you advise.

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Overlyft: https://overlyft.com/

General information for UK small firms, not legal, tax or financial advice.