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Example 1

In January 2018 A gives a painting worth £500,000 to her niece N.

A dies in June 2019 and conditional exemption is claimed.

In February 2021 the painting is sold for £800,000.

A had made no other gifts, apart from using her annual exemptions, and her chargeable estate on death was £290,000.

The sale of the painting in February 2021 is a chargeable event, and IHT will be charged at death rates in force at February 2021, since A has died, on £800,000 as the top slice of A's estate.

IHT chargeable on the chargeable event:

1. Ìý

   –ÌýÌýÌýÌý IHT on £800,000 @ 40% = £320,000

The IHT is payable by N.

If the conditional exemption had not been claimed, the PET would have become chargeable at the full death rates applying at June 2019 on the more modest transfer of £500,000, and in priority to the death estate, ie IHT of only £100,000 in relation to the painting.

Example 2

In May 2019 B, who had made previous chargeable transfers of £350,000