IHT Exemptions (lifetime & death)

Question 1

What is the maximum amount that can be transferred tax-free between UK-domiciled spouses for IHT purposes?

A) £325,000
B) £1 million
C) £175,000
D) Unlimited

Answer 1

D) Unlimited

Explanation:
Under Spouse Exemption (s 18 IHTA 1984), there is no financial limit on IHT-free transfers between UK-domiciled spouses or civil partners.

Question 2

Which exemption applies to gifts to UK-registered charities?

A) Spouse Exemption
B) Business Property Relief
C) Charity Exemption
D) Agricultural Property Relief

Answer 2

C) Charity Exemption

Explanation:
Under Charity Exemption (s 23 IHTA 1984), gifts to registered UK charities are 100% exempt from IHT.

Question 3

Which of the following gifts would qualify for Political Party Exemption?

A) A £10,000 gift to a political party with one MP elected
B) A £50,000 gift to a political movement not registered as a party
C) A £10,000 gift to a party with two MPs elected at the last general election
D) A £5,000 donation to an MP’s personal campaign fund

Answer 3

C) A £10,000 gift to a party with two MPs elected at the last general election

Explanation:
Political Party Exemption (s 24 IHTA 1984) applies if the party has either:

Two or more MPs elected at the last general election, or
One MP elected and at least 150,000 votes received.

Question 4

Which of the following reliefs reduces IHT on business assets?

A) Business Property Relief
B) Agricultural Property Relief
C) Spouse Exemption
D) Quick Succession Relief

Answer 4

A) Business Property Relief

Explanation:
Business Property Relief (s 104 IHTA 1984) provides 100% or 50% relief on qualifying business assets held for at least two years before death.

Question 5

Adam owns a family farm worth £3 million. He dies and leaves it to his daughter, who continues farming.
What relief applies?

A) Business Property Relief
B) Agricultural Property Relief
C) Quick Succession Relief
D) Normal Expenditure Out of Income Exemption

Answer 5

B) Agricultural Property Relief

Explanation:
Under Agricultural Property Relief (s 116 IHTA 1984), farmland used for agriculture for at least two years before death qualifies for 100% relief.

Question 6

Daniel gifts £50,000 to a housing association.
What IHT exemption applies?

A) Charity Exemption
B) Gifts for National Purposes Exemption
C) Housing Association Exemption
D) Normal Expenditure Out of Income Exemption

Answer 6

C) Housing Association Exemption

Explanation:
Housing Association Exemption (s 24A IHTA 1984) applies to land or money gifts made to registered social landlords.

Question 6

Rachel gives her son £500,000 but dies three years later.
What happens for IHT purposes?

A) The gift is a failed PET and is chargeable
B) The gift is tax-free under Annual Exemption
C) The gift is an LCT and taxed immediately
D) The gift is exempt under Business Property Relief

Answer 6

A) The gift is a failed PET and is chargeable

Explanation:
A PET is tax-free if the donor survives seven years. If the donor dies within seven years, it fails and becomes subject to IHT.

Question 7

Eleanor gifts £500,000 to her husband and £150,000 to her brother before dying.
How much of these gifts will be subject to IHT?

A) £0
B) £150,000
C) £325,000
D) £450,000

Answer 7

B) £150,000

Explanation:

The £500,000 gift to her husband is fully exempt under Spouse Exemption.
The £150,000 gift to her brother is a PET and will be taxed if she dies within 7 years.

Question 8

Emma dies leaving 90% of her estate to her children and 10% to charity.
What is the IHT rate on the chargeable part of her estate?

A) 40%
B) 36%
C) 20%
D) 0%

Answer 8

B) 36%

Explanation:
If at least 10% of the net estate is left to charity, the IHT rate reduces from 40% to 36%.

Question 9

Tom dies leaving his entire estate to a UK museum listed in Schedule 3 IHTA.
How much IHT is due?

A) 40%
B) 36%
C) 20%
D) 0%

Answer 9

D) 0%

Explanation:
Gifts to museums listed in Schedule 3 IHTA 1984 qualify for 100% IHT exemption under the Gifts for National Purposes Exemption.

Question 10

Jack owns shares in a trading company worth £800,000. He dies and leaves them to his son.
What relief applies?

A) Agricultural Property Relief
B) Business Property Relief
C) Spouse Exemption
D) Normal Expenditure Out of Income Exemption

Answer 10

B) Business Property Relief

Explanation:
BPR applies to shares in a trading company held for at least two years. The relief is usually 100%.

Question 11

Sarah gifts her brother £200,000, then dies four years later.
How much of the gift will be chargeable to IHT?

A) £0
B) £200,000
C) £325,000
D) £125,000

Answer 11

D) £125,000

Explanation:

Annual Exemption (£3,000 per year) applies for two years, reducing the chargeable amount to £194,000.
Taper Relief applies, reducing the tax liability further.