IHTM31015 - Assessment principles: the tax calculation (death cases)


Firstly, calculate the total tax to pay.

  • Find the chargeable value of the transfer (assets, less liabilities, less any exemptions and capital reliefs)
  • Add the value of any earlier cumulable transfers ( IHTM14502)
  • Deduct any QSR ( IHTM22041)
  • Deduct any tax attributable to any earlier chargeable cumulated transfers.

If there are different Entries ( IHTM31011) on the same occasion, such as free estate and will trust at death, apportion the total tax chargeable between the different Entries. Disregard the value of any earlier lifetime transfers in the apportionment.

If there are different types of property ( IHTM31012) at each Entry, apportion the tax on the Entry between the different types of property.

From each separate Entry and type of property category, deduct any

  • reliefs against tax (DTR, Taper)
  • tax previously paid

The result is the tax now payable on the transfer. If there is any tax attributable to an earlier cumulable transfer, you must assess the tax to pay on it at a separate Entry.

You can find more detailed guidance on assessment calculations ( IHTM31411) in later pages.

Example

T died in June 2002 with free estate (Entry A) of £100,000 personal assets and £150,000 freehold property, upon which instalments are claimed.

T also had an IIP interest in a Will Trust (Entry B). The trust is valued at £200,000 at the date of death.

In his lifetime, T made chargeable lifetime gifts of £200,000 in September 1997 and £100,000 in May 2000 (after exemptions).

The overall tax liability is:

Death estate450,000
PLCT300,000
Total750,000
IHT threshold250,000
500,000 x 40% = £200,000 tax

Less tax attributable to lifetime transfers (which you will assess separately)

September 97 gift (Entry D) – nil

May 2000 gift (Entry C)100,000
Cumulable transfers200,000
300,000
IHT threshold250,000
50,000 x 40% = £20,000 tax

Total tax to pay on the death estate is 200,000 - 20,000 = £180,000

Apportion this between the death estate Entries A and B

Entry A

250,000 x 180,000 tax = £100,000

450,000

divided between

- NIOP

100,000 x 100,000 tax = £40,000

250,000

- IOP

150,000 x 100,000 tax = £60,000

250,000

Entry B (NIOP only)

200,000 x 180,000 tax = £80,000

450,000

You will therefore raise death estate assessments for

  • £40,000 at Entry A NIOP
  • 10 annual instalments of £6,000 (totalling £60,000) at Entry A IOP
  • £80,000 at Entry B NIOP

You will also raise a separate assessment for the lifetime tax of

£20,000 on the Entry C NIOP May 2000 transfer.

Home|Main Contents|Manual Contents

Previous Page|Next Page|Top|Menu