What is the seven-year rule?
The seven-year rule is the principle that most lifetime gifts drop out of an estate for inheritance tax once the giver has survived seven years from the date of the gift. Survive less, and the gift is counted back against the estate's tax-free threshold.
The clock starts on the date of the gift, not the tax year, and it starts only if the gift is genuine. Continue to benefit from what you gave away and the clock never starts at all — see gift with reservation of benefit.
Chargeable lifetime transfers, such as gifts into a discretionary trust, carry a longer shadow: they can affect the tax on gifts made up to fourteen years before death, because a chargeable transfer within seven years of a later gift is brought into the cumulation.
The most persistent misconception is that surviving three years halves the tax on any gift. It does not — taper relief only applies to gifts that exceed the nil rate band, which most are not.