The 7-year rule

If there is any Inheritance Tax to pay on gifts you make during your lifetime, it is charged at 40% on gifts given in the 3 years before you die.
Gifts made 3 to 7 years before your death are taxed on a reducing, sliding scale known as ‘taper relief’.

Years between gift and death Tax paid
less than 3 40%
3 to 4 32%
4 to 5 24%
5 to 6 16%
6 to 7 8%
7 or more 0%

 
Example reproduced from GOV.UK website:
 
Sally died on 1 July 2018. She was not married or in a civil partnership when she died.
Sally left 3 gifts in the 7 years before her death:

  • £300,000 to her brother 6.5 years before her death
  • £50,000 to her sister 4.5 years before her death
  • £150,000 to her friend 3.5 years before her death

Sally is not entitled to any other gift exemptions or reliefs.
There is a £325,000 inheritance tax threshold. Anything below this amount is tax free.
£300,000 is used up by the gift Sally gave her brother. There is no tax to pay on his gift.
The remaining £25,000 is used up by her £50,000 gift to her sister. There’s tax to pay on the amount not covered by the threshold. That means there’s tax to pay on £25,000 of the gift to Sally’s sister at a rate of 24%.
The £150,000 gift given to her friend is taxed at a rate of 32%.
Sally’s remaining estate was valued at £500,000 and charged at the usual 40% inheritance tax rate. Sally used up the tax-free threshold on gifts given before her death.
Gifts are not counted towards the value of your estate after 7 years.