Inheritance Tax Act 1984 Schedule 1A paragraph 5

The baseline amount

Paragraph 5 of Schedule 1A sets out how to calculate the baseline amount for each component of the estate, which is the figure against which the 10% charitable giving test is measured to determine eligibility for the reduced 36% rate of inheritance tax.

• The baseline amount is calculated using a three-step process applied separately to each component of the estate (survivorship, settled property, and general).
• First, identify the value transferred that is attributable to property in the relevant component, then deduct a proportionate share of the available nil-rate band.
• The available nil-rate band is the nil-rate band maximum (including any transferred nil-rate band) less the value of chargeable transfers made by the deceased in the seven years before the relevant transfer.
• Finally, add back any amounts within that component that qualify for charitable exemption under section 23(1), giving the baseline amount against which the 10% donated amount threshold is tested.