Inheritance tax taper relief

Work out the tax on a failed PET, then stress-test the wider estate.

Enter the gift, death date, and prior nil-rate band usage. The app calculates the chargeable part of the gift, applies the correct taper band, and shows the effective rate on the whole gift.

PET calculator

Gift details

Gift amount £ The lifetime gift being tested. A gift to an individual is usually a PET.

Date of gift Start date for the 7-year survival clock. Date of death Used to select the taper band.

Nil-rate band already used by earlier 7-year gifts £ Earlier chargeable gifts reduce the tax-free NRB available to this gift or trust.

Adjust assumptions

Nil-rate band £ Standard IHT threshold before 40% tax applies.

Result

£0 IHT on the gift

Tax due on PET £0

Tapered tax rate 0%

Effective rate on whole gift 0%

Years survived 0.00

0-340%

3-432%

4-524%

5-616%

6-78%

7+0%

Estate exposure

Your fact pattern

UK home and cash £ Main residence, UK bank cash, and similar UK-situs assets. Shares and investments, UK or foreign £ Listed shares, funds, brokerage accounts, or investment portfolios entered in GBP.

EUR foreign estate total € Total euro assets: property, cash, brokerage, shares, or other estate assets. EUR to GBP rate Use today's rate or a planning assumption. Example: 0.86 means €1 = £0.86.

USD foreign holdings / property $ US or dollar assets: property, brokerage, cash, funds, or company holdings. USD to GBP rate Example: 0.80 means $1 = £0.80.

Model as surviving spouse/civil partner estate with transferred allowances Assumes both spouses' or civil partners' unused NRB and RNRB can be transferred.

Qualifying residence passes to direct descendants Required for RNRB. It can be lost or tapered for large estates.

Include foreign estate in UK IHT scope Turn off only if specialist advice confirms assets are outside UK IHT or excluded property.

Planning signal

Estate model

Net estate modelled £0

Available allowance £0

Indicative IHT £0

Accountant-style view

What I would focus on next

Do not rely on the headline £1m allowance

The full £1m only normally arises for a married couple or civil partners where both nil-rate bands and both residence nil-rate bands are available, and the residence conditions are met. A large estate can taper the residence nil-rate band away.

Model gifting in layers

Use PETs for assets you can genuinely give away, then track survival windows. Taper helps only after three years and only on tax above the available nil-rate band.

Foreign property needs specialist review

From April 2025, long-term UK residence is central to UK IHT scope. Foreign estate assets may also have local succession, forced heirship, local inheritance or estate tax, capital gains, and double-tax relief issues.

Shares may offer planning routes

Review whether any holdings could qualify for business relief, whether investment wrappers are efficient, and whether life assurance written in trust is needed to fund a liability.

Trust versus gift

Compare a £2m strategy

Amount to move out of estate £ The amount you are comparing as either an outright gift or a trust settlement.

Monthly trust payments £ Capital paid out from the trust to beneficiaries each month. Years modelled in trust Period used for trust fees and monthly payments.

Setup and legal fees £ One-off solicitor, tax adviser, valuation, and setup costs. Annual trustee/accounting fees £ Ongoing trustee, tax return, accounts, compliance, and advice costs.

Trust entry charge above NRB Immediate lifetime IHT on value settled into many trusts above the available NRB. Simplified exit charge on payments Approximate charge when capital leaves a relevant-property trust. Actual rate is complex.

Trust investment income and compound growth

Annual capital growth Expected yearly increase in asset value before disposal taxes. Dividend / rental yield Annual income from shares, funds, or rental property.

Tax / expense drag on income Income tax, agent fees, repairs, fund costs, and other leakage. Growth years How long trust assets compound before comparing final values.

Reinvest net dividends/rent into the trust If off, net income is treated as distributed cash rather than compounded.

Include possible death-within-7-years trust top-up charge If the settlor dies within 7 years, trust transfers can be recalculated at death rates with credit for entry tax.

Comparison result

Trust versus outright gift

Outright gift / PET route £0

Tax: £0

Trust route after charges £0

Costs: £0

Trust value with growth £0

Profit: £0

This module approximates a relevant property discretionary trust. It is useful for screening, but a real trust calculation needs the exact trust type, settlor history, same-day settlements, beneficiary tax position, investment growth, and local foreign tax advice.

Glossary

Acronyms and tax terms

IHT: Inheritance Tax. UK tax on estates and certain lifetime transfers.
PET: Potentially Exempt Transfer. A lifetime gift to an individual that usually falls out of IHT if the donor survives 7 years.
NRB: Nil-Rate Band. The ordinary IHT tax-free threshold, currently modelled here as £325,000.
RNRB: Residence Nil-Rate Band. Extra allowance when a qualifying home passes to direct descendants, subject to tapering.
CLT: Chargeable Lifetime Transfer. A lifetime transfer that can trigger IHT immediately, such as many transfers into discretionary trusts.
Relevant property trust: A trust regime where assets may face entry, 10-year anniversary, and exit charges.
Entry charge: Lifetime IHT charge when assets enter certain trusts, usually 20% on the value above available NRB.
Exit charge: Possible IHT charge when capital leaves a relevant-property trust, capped at 6% but calculated by detailed HMRC rules.
Taper relief: Relief that reduces tax on a failed PET after 3 years. It reduces tax, not the gift value.
Excluded property: Certain assets outside UK IHT, often dependent on residence status, timing, and asset location. Needs specialist advice.

Sources and caveats

Assumptions used

PET taper rates and the 7-year rule follow GOV.UK guidance on IHT gifts.
The app applies taper to tax attributable to the gift, not the capital value, following HMRC manual IHTM14611.
NRB, RNRB, the £2m RNRB taper threshold, and transferred allowance assumptions follow GOV.UK IHT threshold guidance.
Foreign asset scope is simplified from HMRC manual IHTM27001.
The trust comparison uses headline relevant-property trust assumptions from GOV.UK trusts and IHT guidance.

This is a planning calculator, not tax advice. Actual IHT depends on lifetime cumulation, exemptions, residence status, ownership, debt, reliefs, gifts with reservation, trusts, and local foreign taxes.