Chargeable Gains and Inheritance Tax
Capital gains tax
Understand the chargeable gain computation: disposal proceeds less allowable cost (including incidental costs of acquisition and disposal, and enhancement expenditure reflected in the asset). Know the annual exempt amount (£6,000 for 2023/24, £3,000 from 2024/25), the share matching rules (same-day, then 30-day, then pooled shares), and reliefs - principal private residence, business asset disposal, gift relief, rollover, and entrepreneurs' relief successors. Learn the CGT rates on residential property and carried interest (18%/28%) versus other gains (10%/20%).
Inheritance tax
Build the IHT calculation on death: transferable nil-rate band (£325,000) plus residence nil-rate band (up to £175,000, tapered by £1 for every £2 over £2m), and the 36% reduced rate where 10% of the baseline is left to charity. Understand potentially exempt transfers, chargeable lifetime transfers (immediately taxed at 20% on excess over NRB, with a 14-year cumulation window and 7-year taper), and failed PETs. Know the annual exemption (£3,000), small gifts (£250), normal expenditure out of income, and gifts in consideration of marriage.
Traps
Do not forget to taper the residence nil-rate band and to check the transferable NRB from a deceased spouse. On lifetime gifts, the donee pays the tax for a PET but the donor normally pays for a CLT. Watch the ordering of exemptions and the 7-year cumulation.
Rule of thumb: A PET that fails is charged as if it were the top slice of the death estate, cumulating earlier transfers in the seven years before it.