Scenarios:
The person who has died was not married or in a civil partnership. The estate value at death is £500K which does not include property hence only the NRB tax-free threshold of £325K can be used. The gift was made 3.5 years before death and no other gifts were made. What is the IHT tax liability in either example?
1/ A gift of 100K was made. The NRB allowance applied to the estate is £225K (325-100). The IHT tax will be based on 500K – 225K = 275K. Is the IHT tax 40% applied to the whole 275K or 100K at 32% (taper relief) and 175K at 40%?
2/ A gift of 375K was made. The NRB allowance to the applied to the estate is zero as used up by the 375K gift. The 50K over the 325K has 32% applied and the remaining estate value of 500K has 40% applied?
Is the taper relief only ever applied to the total value of gifts above 325K before death?
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