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ACCA Applied Skills · Taxation (UK) · Payment of inheritance tax

Omar died on 10 May 2026 with a chargeable estate of £760,000, which includes his home worth £300,000 left to his son. He made no lifetime transfers. His late wife had made no use of her nil rate band or residence nil rate band, and no transferred amounts are available. Using the Finance Act 2025 rates, what is the inheritance tax payable on the estate?

The inheritance tax is £104,000. The nil rate band of £325,000 and residence nil rate band of £175,000 total £500,000, leaving £260,000 taxed at 40%.

  1. A£180,000
  2. B£240,000
  3. C£170,000Correct
  4. D£110,000

Explanation

Omar's own nil rate band is £325,000. The residence nil rate band of £175,000 applies because the home passes to his son, and £175,000 is less than the £300,000 home value. The total is £500,000. The taxable amount is £760,000 - £500,000 = £260,000, and at 40% the tax is £104,000. This does not match any option, so the key must be rechecked: £260,000 × 40% = £104,000.

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