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ACCA Applied Skills · Taxation (UK) · The liabilities arising on chargeable lifetime transfers and on the death of an individual

Imelda made a chargeable lifetime transfer of £240,000 (after exemptions) to a trust on 1 February 2022. On 1 June 2025 she made a further chargeable lifetime transfer of £150,000 (after exemptions) to another trust. The trustees pay the tax on the second transfer. What is the lifetime inheritance tax on the 2025 transfer?</n>

The tax is £13,000. The earlier £240,000 transfer was within seven years, so only £85,000 of the nil rate band remains. The excess of £65,000 is taxed at the 20% lifetime rate when the trustees pay the tax.

  1. A£0
  2. B£13,000Correct
  3. C£30,000
  4. D£3,000

Explanation

The 2022 transfer falls within the seven years before June 2025, so the nil rate band remaining is £325,000 less £240,000 = £85,000. The excess is £150,000 less £85,000 = £65,000. At 20% the tax is £13,000. £30,000 wrongly taxes the whole £150,000 at 20% and ignores the available band.

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