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ACCA Strategic Professional · Advanced Taxation (UK) · Inheritance tax: the basic principles of computing transfers of value

Mr Patel died in July 2026 leaving a chargeable estate of £625,000 to his adult son. He had made no lifetime transfers and the residence nil rate band is not available. Using the rates in the ATX-UK tax tables, what is the inheritance tax payable on his death estate?

The tax is £120,000. The estate of £625,000 exceeds the £325,000 nil rate band by £300,000, and that excess is taxed at the 40% death rate. No residence nil rate band or earlier transfers apply, so nothing else reduces the charge.

  1. A£120,000Correct
  2. B£125,000
  3. C£100,000
  4. D£250,000

Explanation

Nil rate band is £325,000. Excess is £625,000 - £325,000 = £300,000, taxed at the death rate of 40%, giving £120,000. The £125,000 option wrongly applies 40% to £312,500, and £100,000 applies the 20% lifetime rate to £500,000-style bases; £250,000 taxes the whole estate less nothing after halving incorrectly.

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