What is Taper relief?

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How does taper relief work? Many people believe that when they make a gift to somebody else, that taper relief is three year sand then after seven years it drops down to zero. While these figures are correct in some instances, it is not always the case.

Taper relief only applies to gifts in excess of the Nil Rate Band. So, if the Nil Rate Bandstands at it currently is at£325,000and a person was to gift £450,000, the taper relief will only apply to the excess. (In other words the £125,000.)

As you can see from the graph below, after three years the type of relief starts in cut in and then after seven years, there is no tax to pay.

But the main thing to bear in mind here is that taper relief only applies to gifts in excess of the Nil Rate Band, and not the whole gift itself.

 

TAPER RELIEF : SLIDING SCALES
Time between date of
gift and date of donor’s
death
Taper relief applied to tax dueEffective rate on gift
0 to 3 Years0%40%
3 to 4 Years20%32%
4 to 5 Years40%24%
5 to 6 Years60%16%
6 to 7 Years80%8%
SOURCE:GOV.UK

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