Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Interest definition

What does Interest mean? Interest is the additional sum payable for the time‑value of money: the amount a borrower pays a lender for using money, the return on debt‑type investments, and the sum awarded for being kept out of funds in litigation. Entitlement arises by: - Contract (contractual interest), including default interest, fixed or floating rates (for example, over base rate or SONIA), and simple or compound interest. Clauses must be clearly drafted and not operate as an unlawful penalty or unfair term. - Statute (statutory interest), for example late payment interest on commercial debts under the Late Payment of Commercial Debts (Interest) Act...

UK Inheritance Tax on QIIP Trusts: Death and Lifetime Termination, PETs/CLTs, GWR, Aggregation, Calculations and Joint Interests

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Practice notes

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Trust property that carries a qualifying Interest in possession (QIIP) can become liable to inheritance tax (IHT) in these circumstances:

when the life tenant (the beneficiary holding the interest in possession) dies
where the life tenant dies within seven years of a transfer or a lifetime ending of their Interest
following a transfer or conversion of the interest into a non-qualifying or discretionary interest

For more on QIIPs, see Practice Note: The meaning of qualifying interest in possession. Property over which a QIIP subsists is not relevant property, so it is not exposed to principal and exit charges during the trust’s life. See Practice Note: The meaning of relevant property for details.

Death of the beneficiary with the qualifying interest in possession

On the death of the beneficiary with the QIIP (the life tenant), the trust property is valued and included within the deceased’s estate, and the IHT estate charge is imposed on that property (as well as any other property in the estate). In determining the value of the trust property, the related property rules apply...

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Web page updated on 21/05/2026

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