IHTM31030 - Assessing: examples of calculations: calculation on death where lifetime transfers are less than the nil-rate band

The example on this page shows you how to calculate tax on an estate where there are lifetime gifts that are below the Inheritance Tax (IHT) nil-rate band. It shows you how to do this using the method at IHTM31015

The facts

Trevor died in June 2012 with free estate (Entry A) of 拢450,000, made up of:

  • 拢200,000 personal assets
  • 拢250,000 freehold property.

The personal representatives have asked to pay the tax due on the freehold property by instalments.

Trevor also had a life interest in a Will Trust (Entry B), which passes on his death. The trust is valued at 拢150,000 at the date of Trevor바카라 사이트檚 death.

In his lifetime, Trevor made chargeable lifetime gifts of:

  • 拢200,000 (after exemptions) in September 2007, and
  • 拢100,000 (after exemptions) in May 2010

The total is 拢300,000.

There is no unused nil-rate band from the previous death of a spouse or civil partner to carry over to Trevor바카라 사이트檚 estate.

Calculate the available nil-rate band

The Inheritance Tax nil-rate band at the date Trevor died is 拢325,000. There is no unused nil-rate band to add to this so the available nil-rate band is 拢325,000.

Apply the available nil-rate band to any lifetime transfers first

The available nil rate band of 拢325,000 is used against the lifetime transfers of 拢300,000 first. This leaves 拢25,000 to be used against the death estate.

Find the chargeable value of the estate at the date of death

The chargeable value of the death estate, after deducting liabilities, exemptions and reliefs is 拢450,000 free estate plus 拢150,000 = 拢600,000.

Apportion the available nil-rate band

Because there is more than one entry (IHTM31011) we must apportion the available nil rate band of 拢25,000 between them, before we can work out the tax.

Entry A

拢25,000 脳 拢450,000 梅 拢600,000 = 拢18,750

Entry B

拢25,000 脳 拢150,000 梅 拢600,000 = 拢6,250

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Calculate the tax on Entries A and B:

Entry A

拢450,000 - 拢18,750 脳 40% = 拢172,500

This is then apportioned between:

  • The personal property (not paid by instalments) (拢200,000 脳 拢172,500 tax) 梅 拢450,000 = 拢76,666.67
  • The freehold property (paid by instalments) (拢250,000 脳 拢172,500 tax) 梅 拢450,000 = 拢95,833.33

Entry B

拢150,000 - 拢6,250 脳 40% = 拢57,500.

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Calculations

Here we will raise death estate calculations for:

  • 拢76,666.67 at Entry A (NIOP)
  • 10 annual instalments of 拢9,583.33 (totalling 拢95,833.33) at Entry A (IOP)
  • 拢57,500 at Entry B (NIOP)