What is the seven-year rule?

The seven-year rule refers to the treatment of lifetime gifts to individuals, known as potentially exempt transfers. A gift to an individual becomes fully exempt from IHT if the donor survives seven years from the date of the gift. If the donor dies within seven years, the gift may be subject to IHT. Taper relief reduces the tax chargeable where death occurs between three and seven years after the gift. The full IHT rate applies to gifts made within three years of death.