About this calculator
The Gift Tax Calculator estimates possible UK inheritance tax exposure on lifetime gifts. It is designed around potentially exempt transfers, annual exemptions, wedding gifts, small gifts, the nil-rate band, and the 7-year rule. UK gift taxation can be complex, so the result should be treated as an educational estimate.
Gift tax estimate method
The calculator subtracts selected gift exemptions, checks how much nil-rate band may remain after previous gifts, and applies a simplified taper-relief rate based on the number of years between gift and death.
- chargeable gift = gift amount - selected exemptions
- available nil-rate band = GBP 325,000 - previous chargeable gifts
- taxable gift = chargeable gift - available nil-rate band
- estimated IHT = taxable gift x taper rate
How to use the gift tax calculator
- Enter the value of the lifetime gift.
- Enter the number of years between the gift and death, or a planning assumption.
- Enter previous gifts that may have used the nil-rate band.
- Enter the annual exemption used for the gift.
- Enter any wedding or small-gift exemption that applies.
- Review the chargeable gift, nil-rate band left, taper rate, and estimated tax.
Gift tax examples
Gift within nil-rate band
Input: Gift GBP 100,000, annual exemption GBP 3,000, no previous gifts.
Calculation: Chargeable gift is GBP 97,000, which is within the GBP 325,000 nil-rate band.
Result: Estimated IHT on the gift is GBP 0 in this simplified example.
Gift above remaining nil-rate band
Input: Gift GBP 500,000, exemptions GBP 3,000, previous gifts GBP 200,000, death 4.5 years later.
Calculation: Available nil-rate band is GBP 125,000. Taxable gift is GBP 372,000. Taper rate is 24%.
Result: Estimated IHT on the taxable part is about GBP 89,280.
The 7-year rule in plain English
Many outright gifts to individuals are potentially exempt transfers. If the donor survives seven years, the gift is usually outside the estate for inheritance tax. If the donor dies within seven years, the gift may be counted back into the IHT calculation.
Taper relief does not simply reduce every gift. It normally reduces tax on gifts above the nil-rate band, which is why previous gifts matter.
Common UK gift exemptions
- Annual exemption
- There is an annual exemption, commonly GBP 3,000, and unused exemption from one previous tax year may sometimes be carried forward.
- Small gifts
- Small gifts up to the relevant limit can be exempt if the same person has not received another exemption from you.
- Wedding gifts
- Wedding or civil partnership gifts have different limits depending on the relationship to the recipient.
Why previous gifts matter
Gifts are generally considered in date order. Earlier chargeable gifts can use the nil-rate band first, leaving less available for later gifts if death occurs within seven years.
Common mistakes
- Assuming taper relief reduces all gifts after three years.
- Ignoring earlier gifts in the seven-year period.
- Using the annual exemption twice on the same gift.
- Forgetting gifts with reservation of benefit rules.
Limitations
Tax rules can change. Check current HMRC guidance or speak to a qualified adviser. This is a simplified educational estimate and does not cover trusts, gifts with reservation, normal expenditure out of income, business relief, agricultural relief, or residence nil-rate band interactions.
Frequently asked questions
Are gifts taxed immediately?
Most outright gifts to individuals are not taxed immediately, but they may matter for IHT if the donor dies within seven years.
What is taper relief?
Taper relief can reduce the tax on certain gifts made more than three years before death, but only where tax is due on the gift.
Does the annual exemption apply every year?
Yes, but unused exemption can only be carried forward one tax year and rules should be checked on GOV.UK.
Do wedding gifts have special limits?
Yes. The exempt amount depends on the relationship between donor and recipient.
Should I get advice?
For larger gifts, trusts, property, business assets, or estate planning, professional tax advice is sensible.
Related calculators
- Inheritance Tax Calculator
- Inheritance Split Calculator
- Net Worth Calculator