IHTM26002 | Calculating the chargeable estate: quantifying the amount which is chargeable and the amount which is exempt

The main purpose of the partly exempt transfer rules is to provide a method of calculating the part of the deceased’s estate which is exempt. The balance is then chargeable.

The rules (IHTM26071) operate by allocating the value of the estate between specific and residuary gifts. The rules apply separately at each title (IHTM26211).

It is normally not necessary to go through the full process in the following situations

• There are no specific gifts (IHTM26040)

• The residue is wholly chargeable (IHTM26030)

• The residue is partly chargeable but there are no chargeable specific gifts (IHTM26050)

• There are chargeable specific gifts but the residue is wholly exempt (IHTM26060)

The rules for quantifying the chargeable estate are mainly contained in IHTA84/S38 and IHTA84/S39. To apply the rules you will need to

• calculate the value (IHTM26013) of each specific gift (IHTM26003) under the rules, and

• then calculate the residue (IHTM26003) by deducting the total value of the specific gifts from the value of the free estate (IHTM26003) for Inheritance Tax (IHT) purposes. The difference is the value of the residue.

To find the chargeable part of the estate

• add together the value of the exempt specific gifts and exempt shares of the residue

• then deduct this total from the value of the free estate for IHT purposes. The difference is the value on which tax is chargeable