Apportionment of IHT burden on death
Apportionment of IHT burden on death

The following Private Client guidance note provides comprehensive and up to date legal information covering:

  • Apportionment of IHT burden on death
  • Calculating the estate rate of IHT
  • Allocation of IHT reliefs on death
  • Allocation of NRB and RNRB
  • Grossing up and partly exempt transfers
  • Examples of apportionment of IHT and calculating the estate rate

The calculation and apportionment of inheritance tax (IHT) due on death can be complex, especially taking account of trust interests, chargeable lifetime transfers, the potential mix of exempt and non-exempt beneficiaries, available reliefs and the basic nil rate band (NRB) and residence nil rate band (RNRB). For further information on calculating IHT on death, see Practice Note: Calculating the inheritance tax (IHT) charge on death, which also contains links to further resources.

While HMRC is concerned only with ascertaining and collecting the correct total amount of IHT (and interest) payable following an individual’s death, the beneficiaries of the individual’s estate will want to be sure that the IHT burden has been correctly allocated and that their legacy has benefited from all relevant reliefs and exemptions in the correct proportions. The correct allocation of IHT is the responsibility of the personal representatives (PRs).

Calculating the estate rate of IHT

Once the total IHT on the estate is calculated, it is usually necessary to work out how much IHT is attributable to each legacy and to the residuary estate and ascertain the respective pots from which it should be paid.

In terms of payment of the IHT, where there is no contrary provision in the deceased’s Will, IHT due on the deceased’s UK free (ie not settled) property which vests in the PRs is