Inheritance Tax - 7 Year rule

[Deleted User]

When someone makes a gift and survives for 7 years, does the gift become exempt from IH? I was reading that if the rest of the estate is within the IH threshold ie more than 285000, than the gift will be included for IH.

Also, can anyone explain the tapering of the 7 year rule?

I'm finding this whole thing very confusing - would appreciate some explanations in very simple terms.

elliebean_2

lindabea wrote:

When someone makes a gift and survives for 7 years, does the gift become exempt from IH? I was reading that if the rest of the estate is within the IH threshold ie more than 285000, than the gift will be included for IH.

If the person survives 7 years after making the gift, it's no longer included as part of the giver's estate for inheritance tax purposes.

lindabea wrote:

Also, can anyone explain the tapering of the 7 year rule?

If the giver dies:
0-3 years after the gift then 100% IHT is payable
3-4 years after the gift then 80% IHT is payable
4-5 years after the gift then 60% IHT is payable
5-6 years after the gift then 40% IHT is payable
6-7 years after the gift then 20% IHT is payable

HTH

[Deleted User]

Thank you Ellie and Paul for your explanations. It's a lot clearer now.

dunstonh

A gift means it has to be a gift as well. The person gifting cannot get benefit from that gift again. Otherwise it gets clawed back into the estate again.

Tiggs_2

very important to realise that if the gifts do not EXCEED the nil band taper relife is NOT relevant...ie. in 99% of cases