The nil rate band for inheritance tax is £325,000 and the standard rate is 40 percent. Walt dies with an estate of £525,000 passing to his nephew. He has made no lifetime gifts and no reliefs apply. How much inheritance tax is due?
Answer and explanation
Correct answer: C. £80,000
- Step 1: Subtract the nil rate band: £525,000 - £325,000 = £200,000 is taxable.
- Step 2: Tax at 40 percent: £200,000 × 0.4 = £80,000.
Answer
£80,000.
Why not the others: £210,000 taxes the whole estate; £130,000 applies 40 percent to £325,000; the estate exceeds the nil rate band.
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