IHTM26002 - Calculating the chargeable estate: quantifying the amount which is chargeable and the amount which is exempt

The main purpose of the partly exempt transfer rules is to provide a method of calculating the part of the deceased’s estate which is exempt. The balance is then chargeable.

The rules ( IHTM26071) operate by allocating the value of the estate between specific and residuary gifts. The rules apply separately at each title ( IHTM26211).

It is normally not necessary to go through the full process in the following situations

• No specific gifts ( IHTM26040)
• Residue wholly chargeable ( IHTM26030)
• Residue partly chargeable but no chargeable specific gifts ( IHTM26050)
• Chargeable specific gifts but residue wholly exempt ( IHTM26060)

The rules for quantifying the chargeable estate are mainly contained in IHTA84/S38 and IHTA84/S39. In order to give effect to the rules you will need to

• calculate the value ( IHTM26013) of each specific gift ( IHTM26003), and
• then calculate the residue ( IHTM26003) by deducting the total value of the specific gifts from the value of the free estate ( IHTM26003) for IHT purposes. The difference is the value of the residue.

To find the chargeable part of the estate

• add together the value of the exempt specific gifts and exempt shares of the residue
• then deduct the total so arrived at from the value of the free estate for IHT purposes. The difference is the value on which tax is chargeable