As originally formulated, IHT (when known as capital transfer tax) was a lifetime cumulative tax, i.e. all inter vivos transfers were accumulated and aggregated with property passing on death. Tax was charged at the time of each transfer and the higher the cumulative total, the greater the tax rate. A ten-year cumulative period was introduced in 1981, and for transfers after 17 March 1986 the cumulation period is reduced to seven years.

To ascertain the amount of tax payable on a chargeable transfer, it is necessary to take into account the donor’s chargeable transfers in the previous seven years (so at this stage PETs are ignored).

The steps in the calculation are:

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