Gifting8 min read
Gifting and the Seven-Year Rule: How PETs Really Work
•By ACJ Financial Planning
Potentially-exempt transfers can wipe out IHT, but taper relief, CLTs and gifts with reservation trip many families up.
Definition of a PET
A PET is a gift to an individual (or bare trust) that becomes IHT-free if you survive seven years.
Taper relief timetable
| Years survived | Effective rate |
|---|---|
| 0–3 | 40% |
| 3–4 | 32% |
| 4–5 | 24% |
| 5–6 | 16% |
| 6–7 | 8% |
Anti-avoidance: gifts with reservation (GWR)
If you retain any benefit – e.g. continue living in a gifted property rent-free – the asset is dragged back into your estate.
Planning tips
- Document gifts (date, value, recipient) – critical for executors.
- Pair PETs with whole-of-life insurance in trust to cover the contingency.
- Consider regular gifts out of income – IHT-free immediately if the criteria are met.
Need Professional IHT Advice?
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