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

Omar gave his friend £20,000 in cash on 15 July 2025, and had made no earlier gifts. His annual exemptions for 2025/26 and 2024/25 are both unused. Omar died on 3 March 2028. Assuming no other gifts, what is the amount of the gift that enters the death estate cumulation for the nil rate band calculation, after the annual exemptions are deducted?

The gift enters the cumulation at £14,000. Omar's £20,000 potentially exempt transfer is reduced by the 2025/26 annual exemption of £3,000 and the unused £3,000 from 2024/25, giving £14,000. Because he died within seven years it becomes chargeable at that value.

  1. A£17,000
  2. B£20,000
  3. C£11,000
  4. D£14,000Correct

Explanation

The gift to a friend is a potentially exempt transfer. Annual exemptions are deducted in the lifetime transfer computation: £3,000 for 2025/26 plus £3,000 carried forward from 2024/25 gives £6,000. The value is £20,000 less £6,000 which is £14,000. Death within seven years makes it chargeable, using £14,000. £17,000 uses only one exemption.

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