Skip to content
Home/Tools/FORM IHT403

How to complete IHT403: gifts, the 7-year rule, and exempt transfers explained

IHT403 is the schedule where the 7-year rule lives.

Every gift the deceased made in the seven years before death must be declared here — because if they died within 7 years, those gifts become part of the taxable estate.

This walkthrough explains which gifts are exempt regardless of when they were made (annual exemption, normal expenditure out of income), which gifts trigger a 7-year clock (Potentially Exempt Transfers), what reservation-of-benefit means, and how to reconstruct a gift history when the records are incomplete.

✓ Official source checked 2 September 2026 · GOV.UK last revised this form 22 June 2026IHT403 on GOV.UK
Executor's First Hour — £179
Free
United KingdomInformational, not legal or financial adviceOfficial source: GOV.UK
Official form · always current

This is the same official IHT403 file HM Revenue & Customs publishes on GOV.UK — the link below fetches the current version live from GOV.UK the moment you click it, so it can never go out of date.

Current version: June 2026 · confirmed on GOV.UK 2 September 2026

This walkthrough takes IHT403 field by field, in plain English. Most of the form is reconstruction, not arithmetic; the hard part is rebuilding a complete seven-year gift history from bank statements and family memory, and knowing which gifts an exemption removes before the nil-rate band is ever touched.

The relief that lowers the tax rate, not the gift
Taper relief reduces the rate of IHT on gifts made 3–7 years before death — but it does NOT reduce the gift's value against the nil rate band.

Many families believe a 3-year-old gift is '60% exempt' and therefore shrinks the taxable estate less.

It does not: the full gift value still uses up nil rate band; taper relief only affects the tax rate payable on the excess above the NRB.
The form, in summary

The IHT403 form, in summary.

Valoren
IHT4038 pages42 fields guided
With Valoren1 hour
with gift records already in the vault
Without Valoren3–6 hours
most of the time is spent reconstructing the gift history from bank statements and family memory
Deadline
6 monthsinterest starts;
filed with IHT400
Who Files
Executoror administrator
with IHT400
£
Fee
Freeschedule to
IHT400
Filed with HMRC
Draws from your Estate File
the records this form is built from
PersonalFinancial Accounts·Income & Outgoings·Legal Instruments·Digital Access Map·Asset Inventory·Civil Dossier·Policy Index·Medical Abstract·Property Folio·Succession Plan·Digital Legacy Registry·Business Interests & Directorships·Funeral & Committal Wishes·Dependent Care & Handoff·Personal Record·RegistryMaster Registry·Renewal Register·People, Authority & Contacts·Designated Places·Kinship & Succession Map·SecureAccess Controls·Recovery Routes·Custody & Contingency·EventsDeath & Estate Activation·Incapacity & Medical Proxy·Absence & Continuity Cover·Access Loss & Identity Recovery·Legal Dispute & Evidence Protocol·Theft & Asset Compromise·Property Damage & Incident Response·Relocation & Address Update Protocol·Separation & Custody Documentation·Business Interruption & Continuity·PersonalFinancial Accounts·Income & Outgoings·Legal Instruments·Digital Access Map·Asset Inventory·Civil Dossier·Policy Index·Medical Abstract·Property Folio·Succession Plan·Digital Legacy Registry·Business Interests & Directorships·Funeral & Committal Wishes·Dependent Care & Handoff·Personal Record·RegistryMaster Registry·Renewal Register·People, Authority & Contacts·Designated Places·Kinship & Succession Map·SecureAccess Controls·Recovery Routes·Custody & Contingency·EventsDeath & Estate Activation·Incapacity & Medical Proxy·Absence & Continuity Cover·Access Loss & Identity Recovery·Legal Dispute & Evidence Protocol·Theft & Asset Compromise·Property Damage & Incident Response·Relocation & Address Update Protocol·Separation & Custody Documentation·Business Interruption & Continuity·
Legal basisStatute

IHT403 is the supplementary schedule used with IHT400 to report gifts made by the deceased in the 7 years before death, gifts with reservation of benefit, and associated operations.

A Potentially Exempt Transfer (PET) — a gift made to an individual — is fully exempt from IHT if the donor survives 7 years.

If the donor dies within 7 years, the gift becomes chargeable and its value is added to the estate (subject to taper relief on gifts made 3–7 years before death).

Gifts to most trusts are Chargeable Lifetime Transfers (CLTs) and are immediately chargeable at the lifetime rate of 20% over the nil rate band threshold.

Section by section

The form, section by section.

Before you start, you’ll need:
  • Who Files — The executor (if there is a will) or the administrator (if there is no will), as part of the IHT400 account
  • 8 pages · 42 fields guided
  • Draws from your Estate File — Financial Accounts, Income & Outgoings, Legal Instruments
Section 1

Exemptions that mean a gift is never taxable

Before listing every gift in the 7-year window, it is worth understanding which gifts are fully exempt from IHT regardless of when they were made.

These do not eat into the nil rate band and do not need detailed reporting.

Annual exemption — £3,000/year

Each tax year, the deceased could give away £3,000 to any number of people without any IHT consequences.

If the full £3,000 was not used in a given tax year, the unused balance could be carried forward one year only (giving a maximum of £6,000 in the second year if nothing was given in the first).

This exemption applies to outright gifts only — not gifts into trust.

Small gifts exemption — £250/person/year

Up to £250 per recipient per tax year is exempt, but only if no part of the annual exemption is applied to the same person in the same year.

If you gave someone £3,000 using the annual exemption, you cannot also use the £250 small gifts exemption for another gift to that person in the same year.

Normal expenditure out of income

This is one of the most valuable and underused exemptions.

Gifts that form part of a regular pattern of expenditure (e.g. monthly standing orders to children, paying a grandchild's school fees every term, covering a family member's rent) and that come from surplus income — not capital — are fully exempt from IHT with no monetary cap.

The evidence requirement is high: HMRC needs to see that the gift was habitual, regular, and made from income rather than by drawing down savings.

Marriage and civil partnership gifts

Gifts made on the occasion of a marriage or civil partnership are exempt up to: £5,000 from a parent; £2,500 from a grandparent or remoter ancestor; £1,000 from any other person.

The gift must be made before or shortly after the marriage/civil partnership — not a gift with that label applied retrospectively.

Gifts to charity, political parties, national institutions

Gifts to UK registered charities, political parties, national museums, and similar bodies are fully exempt.

Gifts to foreign charities are generally not exempt.

Before listing every gift in the 7-year window, it is worth understanding which gifts are fully exempt from IHT regardless of when they were made.

HM Revenue & Customs (HMRC) · IHT403
Section 2

Potentially Exempt Transfers — gifts in the 7-year window

A PET is an outright gift from one individual to another (or to certain trusts for the disabled).

It becomes fully exempt if the donor survives 7 years from the date of the gift. If the donor dies within 7 years, the gift becomes chargeable. This section must list every PET made in the 7 years before death that was not covered by an exemption.

What must be listed

Every gift made within 7 years of death that is not entirely covered by exemptions.

This includes cash gifts, transfers of property (including shares and land), forgiven debts (where the deceased wrote off a loan made to a family member), and payments made on behalf of someone else (school fees, mortgage payments, etc.).

Information needed for each gift

Date of the gift; the name and relationship of the recipient; a description of what was given (cash amount, or description of asset and its value at the date of gift); the open market value at date of gift; any exemptions that apply (annual, small gifts, etc.); the net chargeable value after exemptions.

Taper relief — how it works and what it does NOT do

If a PET becomes chargeable (donor died within 7 years), taper relief applies if the gift was made more than 3 years before death: 3–4 years: 80% of tax rate; 4–5 years: 60%; 5–6 years: 40%; 6–7 years: 20%.

Taper relief reduces the rate of tax payable on the gift — but only on the amount of the gift above the nil rate band.

The full value of the gift still uses up nil rate band in the estate calculation.

Reconstructing the gift history

HMRC expects a complete record. Executors should gather: 7 years of bank statements; building society statements; share dealing records; property disposals.

Look for regular outgoing payments, lump sums to family members, and loan write-offs.

If records cannot be found, HMRC can — and does — request them from banks directly.

It is far better to declare gifts and explain incomplete records than to omit them and be found out.

A PET is an outright gift from one individual to another (or to certain trusts for the disabled).

HM Revenue & Customs (HMRC) · IHT403
Section 3

Chargeable lifetime transfers — gifts to trusts

Unlike PETs, gifts made into most trusts (discretionary trusts, most life interest trusts) are Chargeable Lifetime Transfers and are immediately chargeable at 20% on the amount above the nil rate band at the date of the gift. If the donor died within 7 years, additional IHT may be due.

What is a CLT?

A transfer of value to a trust (other than a bare trust or a trust for a disabled person).

Examples: setting up a discretionary trust for children; transferring money into a family investment company in certain structures; making a gift to an existing relevant property trust.

IHT already paid at the lifetime stage

If IHT was charged at 20% on the CLT when it was made, and the donor subsequently dies within 7 years, HMRC recalculates the tax at the full death rate (40%) and credits the tax already paid.

The additional tax (the difference) is payable from the estate.

Where to find CLT records

Your solicitor or accountant may have records of any trusts established.

Check the deceased's will for references to trusts, look for trust deeds in their papers, and review bank statements for transfers to named trusts.

The trust itself (if still active) will have a record of contributions made by the settlor.

HM Revenue & Customs (HMRC) · IHT403
Section 4

Gifts with reservation of benefit

A gift with reservation of benefit (GROB) is a gift where the donor continued to benefit from or use the asset after making the gift.

The law treats these as still forming part of the taxable estate at death, regardless of when the 'gift' was made.

The classic example — the family home

Parent 'gives' their house to their children but continues to live in it rent-free.

Unless they pay a full market rent, the gift is a GROB and the house remains in the taxable estate at its date-of-death value.

Many families made these arrangements in the 1990s believing they would reduce IHT — they do not.

What breaks the reservation

The reservation is released if the donor pays full market rent for their continued occupation (reviewed annually to market rates); or if the donor ceases to use or benefit from the asset (e.g. moves to a care home).

From the date the reservation is released, the asset leaves the estate — but a 7-year PET clock starts running from that date.

Pre-owned assets tax

Since 2005, a person who gave away an asset but continued to benefit from it (even if they pay market rent to escape the GROB rules) may be liable to the pre-owned assets tax annual charge.

This is an income tax charge, not IHT — and it is a further layer of complexity for GROBs arranged before 2005.

A gift with reservation of benefit (GROB) is a gift where the donor continued to benefit from or use the asset after making the gift.

HM Revenue & Customs (HMRC) · IHT403
Section 5

Normal expenditure out of income — the evidence the exemption requires

HMRC requires specific evidence to accept the 'normal expenditure out of income' exemption. This section explains what to gather — because without it, HMRC will treat these gifts as PETs consuming nil rate band.

What HMRC needs to see

Evidence that the gift was: (1) made as part of the normal expenditure of the deceased (i.e. regular and habitual, not a one-off); (2) made out of income, not capital (i.e. the deceased had sufficient income from all sources after normal living expenses to make the gift without drawing on savings); (3) left the donor with sufficient income to maintain their usual standard of living.

Form IHT403 contains a detailed schedule (Schedule of regular gifts) for this.

The income calculation

Total all income sources in each of the years the gifts were made: pension; state pension; investment income; rental income; ISA income; salary if still working.

Then subtract normal annual living expenses.

The surplus must be at least as large as the gifts made in that year.

HMRC will scrutinise years where the surplus barely covers the gifts.

The 'pattern' requirement

One large gift in isolation is almost never accepted as 'normal expenditure' — HMRC wants to see a pattern.

Three consecutive Christmas gifts of £5,000, or 36 months of standing-order payments, is far more convincing.

Gift occasions that are isolated or irregular will usually fail this exemption.

HMRC requires specific evidence to accept the 'normal expenditure out of income' exemption. This section explains what to gather — because without it, HMRC will treat these gifts as PETs consuming nil rate band.

HM Revenue & Customs (HMRC) · IHT403

Many people file IHT403 themselves — that is what this walkthrough is for. If the estate behind it has stopped being simple — inheritance tax to pay, a trust, foreign assets, a dispute — Signum, Valoren’s own specialist desk, can take it on, and we say so plainly: it starts with a free intake, and if you do not need us, we will tell you. Prefer an independent adviser? STEP and the Chartered Institute of Taxation both keep public member directories, and neither pays Valoren a referral fee.

FAQ

IHT403 questions, answered.

IHT403 is the supplementary schedule filed with the IHT400 account to report gifts the deceased made in the seven years before death, regular gifts made out of income, gifts into trust, and gifts where the deceased kept a benefit (gifts with reservation).

It is where the 'seven-year rule' is actually worked out.
The executor named in the will, or the administrator if there is no will, completes it as part of the IHT400 account.

Where a gift history is large or unclear, it is common to involve a solicitor or accountant, because the figures feed directly into the inheritance tax calculation.
It is filed alongside IHT400, which must be delivered within 12 months of the end of the month in which the person died.

There is no separate deadline for the schedule itself.

Any Inheritance Tax owed falls due earlier — by the end of the sixth month — and interest runs on unpaid tax from that point, so it is worth starting the gift reconstruction early.
No. IHT403 is a supplementary schedule to IHT400 and carries no separate fee.

Any inheritance tax owed on the gifts is calculated through IHT400, not charged for filing the schedule.
Seven years of bank and building-society statements, share-dealing and property-disposal records, and a list of regular or standing-order payments.

For any gift claimed as 'normal expenditure out of income', you also need income figures for each year the gifts were made; for any gift into a trust, you need the trust deed.

If statements are missing, HMRC can request them from banks directly, so it is better to declare a gift and explain a gap than to leave it out.
Assuming taper relief shrinks the gift.

Taper relief only reduces the rate of tax on a gift made three to seven years before death, and only on the part above the nil-rate band.

The full value of the gift still uses up the nil-rate band first — so a three-year-old gift is not '60% exempt'.

Treating it as if it were is the error that most often understates the tax due.

Library

Free guides behind this form

These free institutional briefs cover the records and context that make this form easier — what to gather before you start.

All guides are available free from the Valoren library — no account required.

The monthly note

Keep this walkthrough — and get the monthly note.

Leave your email and we'll send you a link to this guide, plus the Valoren monthly note: one practical household-records briefing, one law or form update, and one worked example each month.

You can unsubscribe with one click.

Valoren is a trading name of Standard Index Group — in formation.
We never sell your data. We never spam. The unsubscribe link is in every email.

Where this fits

IHT403 is one form. The file behind it is the rest.

Forms are easier when the records are ready.

For IHT403, that means seven years of bank and building-society statements, a list of regular payments and standing orders, any trust deeds or chargeable-lifetime-transfer records, and the income figures needed to show a gift came from surplus income rather than capital.

When you're ready — not before — our £179 Executor's First Hour walks you through registering the death, notifying banks and pensions, and getting probate started, in the right order. The free checklist above covers the essentials; this is for when you'd rather have a hand to hold. Executor's First Hour — £179

HM Revenue & Customs (HMRC)42 fieldsNo separate fee — this is a supplementary schedule filed with IHT4001 hour (with gift records already in the vault) with Valoren
The return this attaches to

This is one schedule. It attaches to the IHT400 — the main Inheritance Tax account — which is where every schedule you complete comes together.

Next: IHT400
Part of a working library79form walkthroughs90+free guidesevery calculator & checker