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ACCA Applied Skills · Taxation (UK) · The basic principles of computing transfers of value

Hannah made a chargeable lifetime transfer of £385,000 in August 2025, having made no earlier transfers. The £385,000 is the value transferred after exemptions, and Hannah will bear the tax herself. What is the total value of the transfer after the donor pays the tax, i.e. the gross chargeable transfer?

The gross chargeable transfer is £400,000. The net £385,000 exceeds the £325,000 nil rate band by £60,000, which is grossed up at 20/80 to give £15,000 of tax. Adding the tax paid by the donor to the net gift gives £400,000.

  1. A£400,000Correct
  2. B£385,000
  3. C£415,000
  4. D£397,500

Explanation

Net chargeable transfer £385,000 less nil rate band £325,000 = £60,000 taxed net. Gross up at 20/80: £60,000 x 20/80 = £15,000 tax. Gross transfer = £385,000 + £15,000 = £400,000. Check: £400,000 less £325,000 = £75,000 x 20% = £15,000. Option £385,000 ignores the tax paid by the donor.

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