Last reviewed: June 2026 · For use in England & Wales · eLitigant is a Community Interest Company (No. 16566612), not a law firm. Always check the current official form on GOV.UK before you file, and sign the statement of truth yourself.
Official form & guidance: Form IHT403 (Gifts and other transfers of value) →
In short
Form IHT403 is the Inheritance Tax schedule executors or personal representatives file alongside IHT400 to declare every lifetime gift the deceased made — chiefly in the seven years before death. List each gift with its date and value, then apply the right treatment: potentially exempt transfers (which fall out of the estate after seven years), exemptions such as the £3,000 annual, £250 small-gift, wedding and normal-expenditure-out-of-income reliefs, any gifts with reservation of benefit, and chargeable lifetime transfers. Page 6 holds the income-and-expenditure table; remember taper relief reduces the tax, not the gift’s value against the nil-rate band. eLitigant’s Chris drafts this for you to a professional standard — you check, sign and file.
① Draft it from scratch
Give Chris the gifts, dates and values. It builds your IHT403 schedule — PETs, exemptions, the income-and-expenditure table and any GWR — ready to file with IHT400.
② Check the draft you’ve written
Already started? Upload your IHT403 and Chris reviews it — flagging missed carry-forward, taper-versus-value confusion and overlooked standing orders before you sign.
③ HMRC have queried a gift?
Run the query you received past Chris and get a clear, evidenced response — including normal-expenditure-out-of-income claims, the limb HMRC challenges most.
Form IHT403 is the schedule executors file alongside Form IHT400 to declare every lifetime gift the deceased made in the seven years before death — and, in some cases, further back. It is the schedule HMRC uses to decide whether any of those gifts fall back into the estate for Inheritance Tax. If the deceased was generous, forgetful with paperwork, or simply long-lived, IHT403 is where the work lives.
Seven years of gifts to reconstruct. Bank statements to chase. HMRC waiting.
Chris drafts IHT403 to HMRC standard, line by line. Start Drafting →
When Do You Need IHT403?
Executor or PR of estate that must file full IHT400, and deceased made any gift in the seven years before death beyond trivial amounts. Not optional — IHT calculation cannot be completed without it.
Typical scenarios: cash to children/grandchildren for house deposit, wedding, tuition; Christmas/birthday gifts over £250; transfers of shares, artwork, jewellery, second property; setting up or adding to trust (CLT); writing off a loan; school fees paid for grandchildren; continuing to live in a “given” house (classic GWR).
NOT needed for excepted estates (no IHT400). Full-account territory: schedule comes with it.
The Core Rule: PETs and the 7-Year Clock
A Potentially Exempt Transfer is a lifetime gift from individual to individual (or certain trusts for disabled beneficiaries). At moment of giving: potentially exempt — no immediate IHT due. Clock starts.
- Donor survives 7 full years: gift falls out of estate entirely
- Donor dies within 7 years: gift pulled back at value on date of gift, counts first against available NRB
“First bite” of NRB is why lifetime gifts matter at death. £325,000 PET 6 years before death consumes entire NRB before any other asset tested — exposing rest of estate to 40% IHT.
Taper Relief — s.7 IHTA 1984
Where PET fails (donor dies within 7 years) and gift exceeds NRB, taper reduces tax on excess. Taper reduces tax, not value.
- 0–3 years: 100% tax (0% relief)
- 3–4 years: 80% tax (20% relief)
- 4–5 years: 60% tax (40% relief)
- 5–6 years: 40% tax (60% relief)
- 6–7 years: 20% tax (80% relief)
- 7+ years: 0% tax (100% relief)
Common trap: gift 4.5 years before death does not reduce in value by 40%. Gift still consumes NRB at full value. Taper only softens tax on slice above NRB.
Exemptions That Reduce or Remove a Gift
Annual Exemption — £3,000/tax year
Unused carries forward one tax year only. No gifts in 2024/25 → £6,000 tax-free in 2025/26. Carry-forward used after current year exhausted.
Small Gifts — £250/person/year
Gifts of £250 or less to any one person tax-free. Unlimited recipients. If exceeds £250: whole gift taxable. Cannot combine with annual exemption for same recipient.
Wedding/Civil Partnership Gifts
- Parent to child: £5,000
- Grandparent: £2,500
- Anyone else: £1,000
- Bride/groom: £2,500
Must be in consideration of marriage, before/on ceremony. Wedding called off: exemption fails.
Normal Expenditure Out of Income — s.21 IHTA 1984
Most powerful exemption, most often challenged by HMRC. Three limbs:
- Formed part of donor’s normal expenditure (habitual, regular, settled pattern)
- Made out of income (not capital) — post-tax salary, pensions, interest, dividends, rental
- Donor left with enough income to maintain usual standard of living
IHT403 page 6: income-and-expenditure table. Reconstruct tax year by tax year. Grandparents paying school fees, monthly standing orders, life policy premiums — common successful claims.
Spouses, Civil Partners, Charities
Gifts between UK-domiciled spouses/civil partners wholly exempt. UK charities exempt. List on IHT403 with exemption ticked.
Gifts With Reservation of Benefit (GWR)
Gift where donor gave something away on paper but continued to enjoy it. Classic: parents transfer family home to children but carry on living there rent-free.
For IHT: house never left the estate. Comes back at DOD value, not gift date. s.102 Finance Act 1986.
GWR unless donor entirely excluded from possession/enjoyment AND does not retain benefit. Paying full market rent can cure reservation (“full consideration” exception) — must be documented and genuine.
Chargeable Lifetime Transfers (CLTs)
Gift made by individual into most trusts (not bare trusts or disabled-person trusts). Not PET — taxable at gift date, 20% on amount above available NRB.
Donor dies within 7 years of CLT: reassessed at 40% with credit for 20% paid. Taper applies to death-rate slice above NRB.
14-year rule: CLTs outside 7-year window can “pre-consume” NRB against later PETs. List CLTs separately from PETs on IHT403.
Common Mistakes
- Assuming small gifts don’t count — £300 birthday cheque is not within £250 exemption; whole £300 is a PET (less annual exemption)
- Missing carry-forward rule — current year first, then last year
- Confusing taper with value discount — taper reduces tax not value against NRB
- Overlooking standing orders to adult children
- Claiming normal expenditure from capital — fails
- Forgetting given-but-lived-in home — GWR on page 4
- Loan written off — gift on date of release, not date loan made
- Ignoring 14-year rule — CLTs outside 7 years can still affect PETs within
- Valuing shares at probate date, not gift date
- Signing before figures tie
The Rules That Apply
- s.3A IHTA 1984 — PETs
- s.7 IHTA 1984 — rates and taper relief
- s.19 IHTA 1984 — annual exemption £3,000
- s.20 IHTA 1984 — small gifts £250
- s.21 IHTA 1984 — normal expenditure out of income
- s.22 IHTA 1984 — wedding gifts
- ss.18 and 23–27 — spouse, charity, political, heritage
- s.102 Finance Act 1986 — GWR
- Schedule 20 Finance Act 1986 — tracing and valuation for GWRs
Related Court Forms & Guides
- Form PA1A: Probate (no will) — applying for a grant where there is no will.
- Form PA1P: Probate (with will) — applying for probate where there is a will.
- Form IHT400: Inheritance Tax — the full inheritance tax account.
- Form IHT205: Estate Information — excepted estates and the pre-2022 rules.
- Civil Court Forms Index — every civil court form guide in one place.
How Chris Can Help
Where executors lose days and estates lose money. Arithmetic unforgiving, exemptions overlap, normal-expenditure table rewards patient more than talented. Chris works through bank statements, gift letters, trust deeds; drafts IHT403 presenting each gift with correct exemption, value, narrative.
If records incomplete, we tell you what is missing rather than guess.
FAQ
Bank records don’t go back 7 years?
Most UK banks retain 6–7 years. Release archived records on grant/death certificate. Truly gone: make reasonable enquiries, document efforts, record best estimate.
£5,000 wedding gift use annual exemption?
No. £5,000 parental wedding gift (s.22) is separate from £3,000 annual exemption (s.19). Both apply independently.
7-year clock exact or tax year?
Exactly. Date of gift to date of death, day for day.
What counts as gift?
Any transfer of value without full consideration: cash, shares, property, chattels, interest-free loans, debt written off. Selling below market = part-gift equal to shortfall.
PET fails — who pays tax?
Recipient primarily liable. Not paid within 12 months of death: liability transfers to PRs. Consider insuring risk or holding back distribution.
School fees for grandchildren?
Yes if three limbs of s.21 met: regular pattern, taxed income, usual standard of living maintained. Keep bank statements, letter of intent.
Bare trust gift PET or CLT?
Bare trust = transparent for IHT. Beneficiary treated as owner. Gift = PET. Other trusts (discretionary, life interest post-22 March 2006): CLTs.
Taper within NRB?
No. Taper reduces tax actually due. Failed PET sits entirely within NRB: no tax to taper. Gift still consumes band against other estate assets.
See it done — a schedule of lifetime gifts (IHT403) in minutes
A schedule of lifetime gifts (IHT403), drafted to a high, professional standard — Chris builds all 8 pages from your facts in minutes, where doing it right yourself can take the better part of a day. Scroll the sample below.
One day · unlimited forms & drafts · contracts & correspondence too · no subscription · you check, sign & file
Frequently asked questions
When do I need to file IHT403?
You need IHT403 if you are the executor or personal representative of an estate that must file the full IHT400 account and the deceased made any gift in the seven years before death beyond trivial amounts. It is not optional — the Inheritance Tax calculation cannot be completed without it. It is not needed for excepted estates that file no IHT400.
What is a Potentially Exempt Transfer and the 7-year rule?
A Potentially Exempt Transfer (PET) is a lifetime gift from one individual to another (or to certain trusts for disabled beneficiaries). At the moment of giving it is potentially exempt with no immediate tax, and a clock starts. If the donor survives seven full years the gift falls out of the estate entirely; if the donor dies within seven years the gift is pulled back at its value on the date of gift and counts first against the available nil-rate band.
How does taper relief work?
Where a PET fails because the donor dies within seven years and the gift exceeds the nil-rate band, taper relief reduces the tax on the excess on a sliding scale that increases the further from death the gift was made. A common trap is that taper reduces the tax, not the value — the gift still consumes the nil-rate band at its full value, and taper only softens the tax on the slice above that band.
What exemptions can reduce or remove a gift?
The page covers the annual exemption (£3,000 a year, with unused allowance carried forward one tax year only), small gifts of £250 or less per person per year, wedding and civil-partnership gifts, normal expenditure out of income, and gifts between UK-domiciled spouses or civil partners and to UK charities. Each has its own conditions, and small-gift and annual exemptions cannot be combined for the same recipient.
What is normal expenditure out of income?
It is often the most powerful exemption and the one HMRC challenges most. It requires three things: the gift formed part of the donor’s normal, habitual expenditure; it was made out of income rather than capital; and the donor was left with enough income to maintain their usual standard of living. IHT403 includes an income-and-expenditure table you reconstruct tax year by tax year — common successful claims include grandparents paying school fees and regular monthly standing orders.
What is a gift with reservation of benefit (GWR)?
A GWR is a gift the donor gave away on paper but continued to enjoy — classically, parents transferring the family home to their children while carrying on living there rent-free. For Inheritance Tax the asset is treated as never having left the estate and comes back at its value on the date of death, not the date of gift. Paying full market rent can cure the reservation, but it must be documented and genuine.
Don’t let seven years of gifts trip the estate up
One matter · one case folder · a full day of drafting · 7-day guarantee on the standard of the drafts · you remain the litigant in person
Related guides: Form IHT400: Inheritance Tax account · Form IHT205: Estate information · Form PA1P: Probate (with will) · Form PA1A: Probate (no will) · All civil court forms
Form content and official guidance on this page are reproduced or adapted from material published by HM Revenue & Customs on GOV.UK. Contains public sector information licensed under the Open Government Licence v3.0. eLitigant CIC is independent and is not affiliated with, or endorsed by, HM Revenue & Customs or any government department. Always check the current official form on GOV.UK before you file.