Inheritance Tax for the SQE

Inheritance Tax questions on SQE1 reward method. This free PDF sets out the three kinds of transfer, the exemptions and the order to use them, business and agricultural relief as changed on 6 April 2026, a seven-step method for the death estate, the residence nil-rate band and lifetime gifts on death, with three fully worked examples.

Updated October 2026 · checked against the SQE1 specification, the Inheritance Tax Act 1984 and the Finance Acts on legislation.gov.uk, GOV.UK and the HMRC Inheritance Tax Manual on 21 October 2026. General information, not tax or legal advice.

Where Inheritance Tax sits in SQE1

The SRA examines taxation only inside three subjects. Inheritance Tax is mainly in Wills and the Administration of Estates (FLK2): lifetime transfers that are immediately chargeable or potentially exempt, gifts with a reservation of benefit, transfers on death, exemptions and reliefs, and the scope of the anti-avoidance rules, plus the probate points of valuation, excepted estates, funding the first payment and who bears the tax. Business Law and Practice (FLK1) adds business property relief. The law examined is the law four calendar months before the window opens, so both 2027 sittings use the 2026 to 2027 tax year.

The figures at a glance

The order is the method

Most wrong options use the right rule in the wrong order. On a death, deal with the lifetime gifts first, oldest first: chargeable transfers in the seven years before the death use the nil-rate band before the estate does, while the residence nil-rate band never applies to gifts. For the estate, value it, deduct debts, then reliefs, then exemptions, then the residence nil-rate band and what is left of the nil-rate band, and charge the rest.

New law older materials miss

• Business and agricultural relief: for transfers from 6 April 2026, 100% relief applies only to the first £2.5 million of qualifying property, shared between the two reliefs, with 50% above it. A spouse’s unused allowance can be transferred, up to £5 million.
• AIM shares: now relieved at 50%, not 100%.
• Bands frozen: the nil-rate band, the residence nil-rate band and the £2 million taper threshold are fixed until 2030 to 2031.
• Pensions: unused pension funds come into the estate only for deaths from 6 April 2027, after the cut-off for both 2027 SQE1 sittings.

What is inside the PDF

• How Inheritance Tax is examined, and every figure on one page
• A decision tree that sorts any gift into exempt, potentially exempt, chargeable or reservation of benefit
• The exemptions, their limits and the order to apply them
• Business and agricultural relief from 6 April 2026, worked
• The death estate in seven steps, and the residence nil-rate band with taper
• Lifetime gifts on death: grossing up, cumulation, taper relief and credit
• Who pays and when, variations and quick succession relief
• Three worked examples, ten exam traps, twelve self-test questions and a checklist

For the rest of the tax syllabus, see our free guide to calculating Income Tax, and plan your revision with the SQE1 Specification Checklist.

Frequently asked questions