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

Which one of the following statements about the rates of inheritance tax in the Tax Rates and Allowances is correct?

Inheritance tax is charged at 20% on lifetime transfers and 40% on death, in each case only on the amount exceeding the available nil rate band of £325,000.

  1. AThe lifetime rate is 20% and the death rate is 40% on amounts above the nil rate bandCorrect
  2. BThe lifetime rate is 40% and the death rate is 20% on amounts above the nil rate band
  3. CBoth the lifetime rate and the death rate are 40% above the nil rate band
  4. DThe lifetime rate is 20% on the whole transfer and the death rate is 40% on the whole estate

Explanation

The tax rates given are 20% for lifetime transfers and 40% on death, each applied only to the excess over the available nil rate band. The option applying rates to the whole amount ignores the nil rate band.

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