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ACCA Strategic Professional · Advanced Taxation (UK) · Inheritance tax: the use of exemptions and reliefs in deferring and minimising inheritance tax liabilities

Under the rates and allowances provided for the ATX-UK exam (Finance Act 2025), which of the following correctly states the nil rate band and the inheritance tax rates on the excess over the nil rate band?

The nil rate band is £325,000, with the excess taxed at 20% on chargeable lifetime transfers and 40% on death. The £175,000 figure is the separate residence nil rate band, and the lifetime rate is the lower of the two rates.

  1. ANil rate band £325,000; lifetime rate 20%; death rate 40%Correct
  2. BNil rate band £325,000; lifetime rate 40%; death rate 20%
  3. CNil rate band £175,000; lifetime rate 20%; death rate 40%
  4. DNil rate band £500,000; lifetime rate 20%; death rate 40%

Explanation

The nil rate band is £325,000. The excess is taxed at 20% on chargeable lifetime transfers and 40% on death. Option B swaps the rates. Option C uses the residence nil rate band figure of £175,000. Option D adds the residence nil rate band to the nil rate band, which is not the standard nil rate band.

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