Taper relief

Hi Jilly,

Why in this example there is no taper relief affected.

Thanks.

Inheritance Tax
Question
4. Margaret died on 12 March 2024 leaving an estate valued at £450,000. On 12 July 2016 Margaret had made a gift of £15,000 to her daughter, and on 27 December 2018 she had made a gift of £75,000 to her son. These figures are after deducting available exemptions. Her estate is left equally between her two children and includes her main residence, valued at £350,000.

What is the inheritance tax liability in respect of Margaret’s estate?

A.£16,000
B.£10,000
C.£80,000
D.£180,000
The correct answer is B.

The PET on 12 July 2016 is IHT exempt as it was made more than seven years before Margaret died. The PET on 27 December 2018 utilises £75,000 of the nil rate band, so £425,000 (175,000 residence nil rate band + (325,000 ? 75,000)) is available against the estate. The IHT liability is therefore £10,000 (40% × (450,000 ? 425,000).