What is taper relief on potentially exempt transfers?
Answered 11 March 2026
Here is a comprehensive answer on taper relief on potentially exempt transfers (PETs) for Inheritance Tax (IHT) purposes.
Taper Relief on Potentially Exempt Transfers (IHT)
What the law says
What is a PET? Under IHTA 1984, s.3A(1) and (1A), a potentially exempt transfer is a transfer of value made by an individual (on or after 18 March 1986) which would otherwise be a chargeable transfer, to the extent it constitutes a gift to another individual, a gift into a disabled trust, or (post-22 March 2006) a gift into a bereaved minor's trust on the ending of an immediate post-death interest.
A PET made seven years or more before the transferor's death is an exempt transfer. Any other PET (i.e. where the transferor dies within seven years) becomes a chargeable transfer.
The taper relief rule — IHTA 1984, s.7(4) Where a PET becomes chargeable (because the transferor dies within seven years), the tax is charged at the full death rates. However, where the transfer was made more than three years before death, the tax is reduced by taper relief as follows:
| Years between transfer and death | % of full death rate charged |
|---|---|
| More than 3 but not more than 4 years | 80% |
| More than 4 but not more than 5 years | 60% |
| More than 5 but not more than 6 years | 40% |
| More than 6 but not more than 7 years | 20% |
Important floor rule — s.7(5) If the tax calculated under the taper relief rules (s.7(4)) would be less than the tax that would have been chargeable at lifetime rates (half the death rate) had the transferor not died within seven years, then taper relief does not apply — the lower lifetime charge is not repaid.
HMRC guidance / practice
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Taper relief only applies where the chargeable PET is over three years from the date of death. HMRC applies taper relief against the tax payable on the PET.
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In cases involving double charges (e.g. home loan or double trust schemes), HMRC notes that taper relief (if the PET is taxable and made more than 3 years before death) will affect which of the two alternative calculations produces the higher charge.
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For immediately chargeable transfers where additional tax arises on death, taper relief is similarly available if the transfer was made more than three years before death.
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HMRC's COMPASS system automatically calculates taper relief on lifetime transfers that become chargeable. HMRC caseworkers are instructed to verify the date of transfer is correctly entered, as an incorrect date will produce incorrect taper relief.
In summary: Taper relief is an IHT relief that reduces the tax payable on a failed PET (one where the transferor dies within seven years of making it). No relief is available if death occurs within three years of the gift. Between three and seven years, the tax is progressively reduced on a sliding scale from 80% down to 20% of the full death rate charge, subject to the floor that the tapered charge cannot fall below what would have been charged at lifetime rates.
Citation sources
years before the death, 80 per cent; b where the transfer is made more than four but not more than five years before the death, 60 per cent; c where the transfer is made more than five but not more than six years before the death, 40 per cent; and d where the transfer is made more than six but not more than seven years before the death, 20 per cent. 5 If, in the case of a chargeable transfer made before the death of the transferor, the tax which would fall to be charged in accordance with subsec
If the chargeable transfer is more than three years before the transferor’s death, you allow taper relief on the recalculated tax. (IHTM14611)
PART I GENERAL Rates Rates. 7 1 Subject to subsections (2), (4) and (5) below and to section 8D and Schedule 1A the tax charged on the value transferred by a chargeable transfer made by any transferor shall be charged at the following rate or rates, that is to say— a if the transfer is the first chargeable transfer made by that transferor in the period of seven years ending with the date of the transfer, at the rate or rates applicable to that value under the . . . Table in Schedule 1 to this Ac
The Inheritance Tax (Double Charges Relief) Regulations SI2005/3441 provide for a specific relief where a home loan or double trust scheme (IHTM44103) is unravelled by the debt being released or written off. The effect of unravelling the scheme in this way is that, on the assumption that the settlor has died within 7 years of making the original potentially exempt transfer (PET), both the PET and the value of the now unencumbered property form part of the estate. The regulations operate in the s
If the chargeable PET is over three years from the date of death, apply taper relief (IHTM14611) against the tax that is payable on the PET.
extent that, by virtue of the transfer, the estate of that other individual is increased, . . . 3 Subject to subsection (6) below, a transfer of value falls within subsection (1)(c) above, as a gift into an accumulation and maintenance trust or a disabled trust, to the extent that the value transferred is attributable to property which, by virtue of the transfer, becomes settled property to which section 71 or 89 of this Act applies. 3A Subject to subsection (6) below, a transfer of value falls
COMPASS will automatically calculate taper relief (IHTM14611) on lifetime transfers that are chargeable in their own right, using the date of the transfer entered at the data entry stage. If the date is wrong, the taper relief will be wrong. Where taper relief is shown, or you expect it to be shown, you should check it is correct.
PART I GENERAL Main charges and definitions Potentially exempt transfers. 3A 1 Any reference in this Act to a potentially exempt transfer is a reference to a transfer of value— a which is made by an individual on or after 18th March 1986 but before 22nd March 2006 ; and b which, apart from this section, would be a chargeable transfer (or to the extent to which, apart from this section, it would be such a transfer); and c to the extent that it constitutes either a gift to another individual or a