Calculating Inheritance Tax

Introduction

Chapter 9 set out the substantive law of **inheritance tax ('IHT')**. Chapter 10 now **applies** those rules to fully worked calculations. FLK2 questions are almost always in the form *'compute the IHT payable'*, and they test whether the candidate can execute the steps **in the right order on the right figures**. This chapter presents **six generic calculation frameworks** together with the **2026 figures** that must be used in every answer: a **CLT re-assessment** on death within seven years; a **failed PET with taper**; a **death estate with transferable NRB**; a **death estate with tapered RNRB**; a **partly exempt estate requiring grossing-up**; and an estate with **BPR/APR subject to the £1m combined cap** from 6 April 2026.

Assessment focus

For SQE1 FLK2, IHT calculation questions are **single best answer questions (SBAQs)** in which the **distractors are themselves the figures a candidate reaches by making a common error** — tapering the value rather than the tax, omitting the annual exemption, applying separate BPR/APR caps, or forgetting that lifetime tax is credited but never refunded. Compute in the order: (1) **lifetime exemptions**; (2) **reliefs** (BPR/APR, QSR) reducing the value transferred; (3) **cumulation** of prior chargeable transfers and the available **NRB** (reduced by cumulated transfers in the prior seven years); (4) apply the **rate**; (5) apply **taper relief** to lifetime transfers where relevant; (6) **reduced 36% rate** on the death estate if the 10% charity test is met. This is a **closed-book** assessment: memorise every 2026 figure and the calculation sequence.

Study tips

1) Memorise the **2026 figures**: NRB **£325,000**; RNRB **£175,000**; RNRB taper start **£2,000,000**; lifetime rate **20%** (or **25%** grossed-up); death rate **40%** (or **36%** reduced rate); BPR/APR combined 100% cap **£1,000,000**. NRB and RNRB are **frozen to 5 April 2030**. 2) **Taper relief reduces the TAX, not the VALUE** — the transferred value stays in the cumulation register and continues to erode the NRB. 3) The **cumulation window is SEVEN years** from the date of the transfer under review: look back seven years from **death** for the death estate, seven years from **year X** for a CLT made in year X. 4) **Lifetime tax is credited but never refunded** if the tapered death-rate figure is lower. 5) The **RNRB £2m taper bites on the net estate BEFORE reliefs**; the £1m BPR/APR cap is a **single combined pool**, not separate caps.