SQE1 · FLK2 · Wills and the Administration of Estates
Inheritance tax basics — SQE1 Wills question
A worked single-best-answer question on inheritance tax basics, with why each wrong option is wrong — the way SQE1 traps candidates.
Inheritance tax basics
Ruth, who had never married, died in 2026. Her will leaves her house in England, worth £600,000, to her nephew, Sam, and her residuary estate, worth £300,000, to her friend, Tara. The will says nothing about who is to bear any inheritance tax. Inheritance tax is payable on Ruth's estate.
Who bears the inheritance tax attributable to the house?
- ASam, because tax on a specific gift of land is always borne by the beneficiary of that gift.
- BTara, because tax on UK property that vests in the personal representatives is a testamentary expense payable from residue unless the will provides otherwise.
- CSam and Tara rateably, in proportion to the values they each receive.
- DSam, unless the personal representatives sell the house, in which case the tax is borne by residue.
- EThe personal representatives personally, with a right to be reimbursed by Sam.
Show answer and reasoning
B is the best answer. Under s 211 Inheritance Tax Act 1984, in the absence of contrary provision in the will, inheritance tax on UK property that vests in the personal representatives and is not comprised in a settlement is treated as a testamentary expense and borne by residue. Specific gifts of such property are therefore 'free of tax' by default, so Tara's residue bears the tax on the house.
Rule: Unless the will provides otherwise, inheritance tax on UK property vesting in the personal representatives is a testamentary expense borne by residue.
- A The default rule is the opposite for UK free estate: tax is a testamentary expense borne by residue. (wrong rule)
- C There is no rateable apportionment of tax on UK free estate in the absence of a direction in the will. (wrong rule)
- D Whether the house is sold does not affect the incidence of tax under s 211. (wrong rule)
- E Although personal representatives are accountable to HMRC, the question is who ultimately bears the tax, which is residue. (answers a different question)
Source: Inheritance Tax Act 1984, s 211
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