IHT

Hi, I am about to sit my Taxation exam in 3 weeks and I did some mock tests and I came across this question about IHT and ACCA only gives the correct answers, and they do not give the explanation as to why that is the correct answer or any debrief etc… can you please help me with this question because I really don’t know how they got that figure …

According to my knowledge of what I studied so far, I calculated like this:

Gross chargeable estate 950,000
Less RNRB (resident Nil Rate Band) (175,000)
Less NRB £325.00
Less GCT’s from 7 prior years (220,000)
Available NRB (£105,000)
Taxable amount £670,000
IHT @ death @40% £268,000

The PET gift from 14 August 2015 is too old, more than 7 years before death so it does not become chargeable so I left that out… the PET from November 2024 becomes chargeable so I reduced the NRB @ death by that one but I still don’t get £338,000. I applied the RNRB because it says in the question that she leaves the whole estate to her children who are direct descendants so it should apply.

Not sure how to get to their answer of £338,000….. any idea? The only way you would get this £338,000 figure was if I didn’t apply the RNRB…it would be £950,000 less the revised NRB of ££105,000 = £845,000 x 40% death IHT = £338,000. But why would they not apply the RNRB since the deceased leaves the estate to her children, who are direct descendants…. ?

This is the question from the mock exam:

“You should assume that today’s date is 15 March 2025.
Opal is aged 71 and has a chargeable estate for inheritance tax (IHT) purposes valued at
£950,000.
She owns two properties respectively valued at £374,000 and £442,000. The first property has an
outstanding repayment mortgage of £160,000, and the second property has an outstanding
endowment mortgage of £92,000.
Opal owes £22,400 in respect of a personal loan from a bank and she has also verbally promised
to pay legal fees of £4,600 incurred by her nephew. Opal expects the cost of her funeral to be
£5,200 and this cost will be covered by the £6,000 that she has invested in an individual savings
account (ISA).
Under the terms of her will, Opal has left all of her estate to her children. Opal’s husband is still
alive.
On 14 August 2015, Opal had made a gift of £100,000 to her daughter and on 7 November 2024,
she made a gift of £220,000 to her son. Both these figures are after deducting all available
exemptions.
You should assume that both the value of Opal’s estate and the nil rate band will remain
unchanged for future years.

What amount of IHT will be payable in respect of Opal’s chargeable estate valued at
£950,000 were she to die on 20 March 2025?
£250,000
£338,000
£378,000
£335,600”