Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Inheritance tax definition

What does Inheritance tax mean? Inheritance tax describes the taxation of wealth transfers on death and, in defined cases, on lifetime gifts and trust transfers. In the UK (England & Wales, Scotland and Northern Ireland), Inheritance Tax is a statutory regime under the Inheritance Tax Act 1984, charged at rates up to 40% on transfers of value. It is usually payable from the deceased’s estate by personal representatives. Lifetime charges arise on chargeable lifetime transfers (typically gifts into most trusts) and where a donor dies within seven years of a potentially exempt transfer. Key features include the nil-rate band and, where conditions are met,...

UK IHT treatment of disabled persons' trusts: qualifying beneficiary tests, s89/89A/89B structures, RNRB 'closely inherited' rules, aggregation, and pre-1981 s74 settlements

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Practice notes

‘Disabled trust’

A ‘disabled trust’ receives preferential Inheritance tax (IHT) treatment. Access to this concession depends on meeting specific qualifying conditions. Eligibility requires the trust to be a type permitted under section 89 of the Inheritance Tax Act 1984 (IHTA 1984), as amended, and to have a qualifying disabled Beneficiary. Before the Finance Act 2006 (FA 2006), disabled persons’ trusts were little known among practitioners. FA 2006 moved most Life interest trusts—particularly inter vivos arrangements rather than those set up by Will—into the relevant property regime. Consequently, for many families the IHT effects of transferring assets to a life interest trust mirrored those already applied to discretionary trusts. Chief among these was a 20% entry charge on amounts above the nil-rate band (NRB) for IHT (£325,000 in England and Wales up to 5 April 2023). Trusts holding more than the NRB could also incur ten-yearly and exit charges. However, where a trust constitutes a disabled person’s interest, a transfer into it does not...

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Phillipa Bruce-Kerr

HCR Law

I help people to understand the challenges they may face as they get older, and provide guidance on how to tackle them head on. I work with families to plan for the future they want, and support older people when they want to keep their independence.I specialise in helping older and vulnerable people, and many of my clients are referred to me by charities such as Age UK, Alzheimer’s Society and Scope. I’m also an approved adviser for Mencap, and a fully accredited member of Solicitors for the Elderly. It’s important to be clear and to listen carefully when working with any person, but I use my skills to bring reassurance to my clients. Thanks to my knowledge and experience, I provide an insight that relatively few solicitors can offer.I’m happy to visit my clients at home, or in hospitals or care homes, and I’m...

Web page updated on 21/05/2026

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