ACCA Applied Skills · Taxation (UK) · Payment of inheritance tax
Hamid died in March 2026 leaving a taxable estate of £700,000 to his friend. He made no lifetime transfers. His nil rate band is £325,000. Residence nil rate band is not available because no home passes to direct descendants. What is the inheritance tax payable on death?
The inheritance tax is £150,000. With no residence nil rate band available, only the £325,000 nil rate band applies. The remaining £375,000 of the estate is taxed at the 40% death rate, producing £150,000.
- A£150,000Correct
- B£140,000
- C£280,000
- D£75,000
Explanation
Excess over the nil rate band is £700,000 - £325,000 = £375,000. At the death rate of 40% the tax is £150,000. £280,000 taxes the whole estate at 40%. £140,000 wrongly deducts the residence nil rate band of £175,000 giving £200,000 at 40% = £80,000? No; it is a miscalculation, and the residence band is unavailable.
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