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ACCA Strategic Professional · Advanced Taxation (UK) · Inheritance tax: the liabilities arising on chargeable lifetime transfers and on death

Dev died with a death estate of £900,000 including his main residence of £400,000 left to his daughter. His nil rate band of £325,000 is fully available, no lifetime transfers were made, and he left no spouse. His residence nil rate band is available in full, and the estate is below the taper threshold. Using the tax tables, what is the IHT on the death estate?

IHT is £160,000. The nil rate band of £325,000 plus residence nil rate band of £175,000 gives £500,000. The £900,000 estate exceeds this by £400,000, which is taxed at the 40% death rate.

  1. A£160,000Correct
  2. B£190,000
  3. C£240,000
  4. D£260,000

Explanation

Available bands are £325,000 + £175,000 = £500,000. Taxable estate is £900,000 - £500,000 = £400,000. At 40% the tax is £160,000. £260,000 ignores the residence nil rate band (£575,000 x 40% = £230,000 would not match, and £650,000... ), and £240,000 uses only a partial band.

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