Example 1—mutual PETs
In September 2017 X gave Y a holding of shares valued at £360,000.
In October 2018 X settled £341,000 on discretionary trusts, the trustees bearing the IHT of £3,200.
In December 2019 Y gave the shareholding back to X.
On 6 November 2020 X died with an estate valued at £802,000, including the shareholding now valued at £402,000. X had always used his annual exemptions.
The IHT payable is the higher of:
| PET included but shareholding ignored in death estate | |
September 2017 PET now chargeable to IHT at 80% of death rates (taper relief)
(360,000 – 325,000) × 40% × 80% | £11,200 |
| October 2018 additional IHT on chargeable transfer, IHT at 40% (NRB exhausted) | £136,400 |
| Deduct: Lifetime IHT | 3,200 |
| £133,200 |
| 6 November 2010—death | |
| The shareholding in X's estate is disregarded, so estate is £(802,000–402,000) = | £400,000 |
| IHT at 40% (NRB exhausted) | £160,000 |
| Total IHT payable by reason of X's death £(11,200 + 133,200 + 160,000) = | £304,400 |
| PET ignored but shareholding included in death estate | |
| September |
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