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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Reduced rate for gifts to charity: components of the estate: summary

A person’s estate (IHTM04029) for Inheritance Tax (IHT) is made up of all the property to which they are beneficially entitled, so there may be a number of chargeable elements to the estate, which IHTA84/Sch1A describes as ‘components’ of an estate. The reduced rate applies separately to each component that makes up an estate, so it is possible that one component may bear tax at 36% whilst others pay tax at the full rate.

For the purposes of applying the reduced rate, IHTA84/Sch1A/Para 3 divides the aggregate estate on death into three components

  • the survivorship component, (IHTM45004)
  • the settled property component, (IHTM45005)
  • the general component (IHTM45007)
  • It is possible for one or more components to be merged so that the combined component qualifies for the reduced rate (IHTM45035). Property in which a reservation of benefit subsists (IHTM45006) is eligible to be merged with other components, even though it is not specifically identified as a component of the estate.