June 2023 to March 2024 exams Watch free ACCA TX lectures
Nil Rate Band The
Nil Rate Band is the amount that can be gifted without incurring any IHT liability.
The NRB in the tax year of the gift should be used.
The NRB for the tax year 2021/22 = £325,000. If you need the NRB for a previous tax year, it will be
given to you in the question.
The NRB must be reduced by the
gross chargeable transfers (GCTs) made in the previous seven
years. During the donor’s lifetime GCTs only include CLTs, not PETs.
The appropriate rate of tax There are two rates of lifetime tax – it depends on who is paying the tax:
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if the trustees pay tax: 20%
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if the donor pays the tax (default assumption): 25%
Illustration 3 Ronald created a discretionary trust on 1 June 2022 and transferred £400,000 to the trustees. The
trustees agreed to pay the IHT due.
Assuming Ronald has made no other lifetime transfers, calculate the IHT payable on the transfer .
Calculating the gross chargeable transfer (GCT) carried forward If the trustees pay the tax at 20% then this is equal to a gross gift and is the chargeable amount only.
In the illustration above that is £444,000
If the donor pays the tax at 25% this is equal to a net gift and the GCT carried forward is the
chargeable amount plus any lifetime tax paid by donor.
Ronald
2022/23
CLT 1 June
2022
Transfer of value
450,000
Less: AEs
– CY (2022/23)
(3,000)
– PY (2021/22)
(3,000)
Chargeable amount
444,000
NRB (2022/23)
(325,000)
Taxable amount
119,000
Lifetime tax @ 20%
23,800
