ACCA ATX ^UK Syllabus A3. Inheritance Tax - IHT implications of trusts - Notes ^{2 / 2}

IHT implications

There are 2 IHT charges when property passes into/out of a trust for inheritance tax

1. Principal Charge

   This must be paid every 10th anniversary by the trustees.

   It is 6% of the value of the property every 10th anniversary. 

   For example, property passed into a trust in 2015 when it was valued at £1,000,000 and in 2025, it is valued at £1,500,000. 

   The principal charge will be 6% * £1,500,000 = £90,000.

2. Exit Charge

   This must be paid when the property leaves the trust.

   For example,  property passed into a trust in 2015 when it was valued at £1,000,000, the donor died in 2024 and the property will be passed on to the beneficiary in 2024 when it is valued at £1,200,000.

   The exit charge will be 6% * £1,200,000 = £72,000.

This is all you need to know about these charges.  You will not be asked to compute the them in your exam.