UKI received a large gift from a relative who died within 7 years. Do I owe IHT?
Yes, you may owe Inheritance Tax (IHT) on the gift if your relative died within 7 years of giving it — this is known as a 'potentially exempt transfer' that becomes chargeable on death.
What the Law Says
The Inheritance Tax Act 1984 treats gifts made during a person’s lifetime as 'potentially exempt transfers' (PETs). If the donor dies within seven years, the gift loses its exemption and may be taxed.
A gift from a relative is usually a 'potentially exempt transfer' (PET) under UK law. It only becomes fully exempt from Inheritance Tax if the donor lives for at least seven years after making it.
If the donor dies within those seven years, the gift is added back into their estate for IHT purposes. The tax is then calculated on the total value above the nil-rate band (£325,000 in 2024/25), and may be payable by the recipient (you) or the estate — depending on who holds the asset and the terms of the will.
Taper relief reduces the tax rate (but not the amount charged) for gifts made 3–7 years before death: 3–4 years = 32%, 4–5 years = 24%, 5–6 years = 16%, 6–7 years = 8%. No relief applies in the first 3 years.
Statutory TextA transfer of value shall not be a potentially exempt transfer unless it is a transfer of value made by an individual otherwise than by way of a disposition on death.
— Inheritance Tax Act 1984, s. 3A
What to Do
Check the date the gift was made and confirm the donor’s date of death — calculate how many years and months elapsed.
Work out the gift’s value and whether it exceeds the annual exemption (£3,000 per year, plus unused allowance from previous year up to £1,000).
Contact HMRC or a probate solicitor to determine if the gift falls into the deceased’s taxable estate and whether taper relief applies.
If IHT is due and you received the gift directly, you may be liable to pay — but often the executor pays from the estate first.
Keep full records: bank statements, gift letters, valuations, and correspondence with the executor or HMRC.
Sources
Not legal advice. This article is general information based on publicly available sources, written for educational purposes. Laws change and individual situations vary. Consult a licensed attorney in your jurisdiction before acting on anything you read here. Last reviewed: 2026-06-08.