TAX - IHT

Which TWO of the following statements are true about inheritance tax?

• It is an indirect tax

• It is a progressive tax

• It is an environmental tax

• It is a redistributive tax

Gillian owned a 70% shareholding in Rose Ltd, an unquoted investment company. On 23 July 2022, she gave a 20% shareholding in Rose Ltd to her son.

The values of shareholdings in Rose Ltd on 23 July 2023 were as follows:

100% shareholding - £600,000

70% shareholding - £350,000

50% shareholding - £200,000

20% shareholding - £80,000

What is the diminution in value of Gillian's estate as a result of her gift on 23 July 2023?

Joel and Sunita were a married couple. Sunita died in July 2009 and 65% of her nil rate band of £312,000 (2008/09) was unused. Joel died in May 2023. He had made a potentially exempt transfer (after all available exemptions) of £75,000 in August 2019. Joel left his estate to his sister. Any relevant elections were made.

What is the nil rate band available to set against Joel's death estate?

• £325,000

• £452,800

• £461,250

• £536,250

On 7 July 2018, Paul made a gross chargeable transfer (after all exemptions) of £260,000. On 19 December 2023, he gave £190,000 to a trust. Paul agreed to pay any lifetime inheritance tax (IHT) due. How much IHT will be payable by Paul on the December 2023 transfer of value?

• £28,250

• £31,250

• £29,750

• £23,800

Donald made the following transactions in the tax year 2023/24:

(1) A gift of £2,000 to his granddaughter on the occasion of her marriage.

(2) A sale of a vase to his friend, Alan, for £1,000 which both Donald and Alan believed to be the market value of the vase. The vase was later valued by an auction house as worth £20,000 at the date of the sale.

Ignoring the annual exemption, what is the total value of potentially exempt transfers made by Donald as a result of these gifts?

• £0

• £21,000

• £2,000

• ­£19,000

What is the diminution in value of Daniel's estate as a result of his gift on 10 October 2023?

• £123,000

• £18,000

• £27,000

• £66,000

Ken died on 15 January 2024 leaving a chargeable estate valued at £245,000. He had made gross chargeable lifetime transfers of £98,000 in October 2016 and £118,000 in June 2020.

How much inheritance tax (IHT) is payable in respect of Ken's chargeable estate of £245,000?

Rodney died on 13 August 2023. In his will he left £200 in cash to each of his five nephews, investments held in ISAs valued at £350,000 to his daughter, and the residue of his estate, which amounted to £520,000, to his wife.

What is the chargeable estate for inheritance tax purposes?

Rachel is aged 85 and in poor health. She is keen to minimise the inheritance tax due on her death estate which is likely to have a value of about El.2 million. Her will currently leave her main residence (valued at €300,000) to her brother and the residue of her estate to her son. Rachel has never been married. Complete the following sentence in each space.

The inheritance tax liability on Rachel's estate will (1)………………… by (2)………………….. if she leaves her main residence to her son rather than her brother.

• Increase

• Decrease

• £175,000

• £70,000

Nadia died on 6 December 2022. Her death estate included her main residence which was valued at £360,000 on which there was secured an outstanding repayment mortgage of £140,000. Nadia will leave her entire estate to her three children.

Nadia is a widow. Her husband died in 2009 leaving his entire estate to Nadia.

What amount of residence nil rate band will be available in computing inheritance tax on Nadia's death estate?

• £175,000

• £220,000

• £350,000

• £360,000