Inheritance tax taper relief
When taper relief applies and how it can reduce the tax that needs to be paid on lifetime gifts.
Taper relief causes a lot of confusion over when it applies and how it works.
To start with, although it is called taper ‘relief’, it is not strictly a relief as defined elsewhere in the Inheritance Tax Act 1984 (IHTA). It is actually a percentage reduction in the tax payable. It does not reduce the capital value of the gift – it only reduces the actual tax payable. Therefore, if there is no tax payable on death on a specific gift, you cannot claim taper relief to reduce the value of that gift.
Consequently, any gift which sits inside the available nil rate band (NRB) – currently up to £325,000 or up to £650,000 if a transferable nil rate band is available – cannot benefit from taper relief.
Taper relief (under IHTA/S7(4)) applies where:
- the gift was made more than three years but less than seven years before the transferor’s death, and
- tax is due on the gift in its own right.
This document is based on Canada Life’s understanding of applicable UK tax legislation and current HM Revenue & Custom’s practice, as at April 2025 and could be subject to change in the future. It is provided for professional advisers only. Any recommendations are the adviser’s sole responsibility.