R01 Estate and tax planning: free practice questions

1. Question 1 of 5

   Which IHT nil rate bands are available on a death in 2026/27?

   Option A: A nil rate band of £325,000 onlyOption B: A nil rate band of £325,000 and a residence nil rate band of up to £175,000Option C: A single nil rate band of £500,000Option D: A nil rate band of £175,000 and a residence nil rate band of £325,000

   Show answer

   The answer is B: A nil rate band of £325,000 and a residence nil rate band of up to £175,000

   The NRB is £325,000. The RNRB adds up to £175,000 where a main residence passes to direct descendants, tapering by £1 for every £2 of estate above £2m.

   Why the other options are wrong

   A

   The RNRB can also apply when a home passes to direct descendants.

   C

   There are two separate bands, with different conditions.

   D

   The figures are the other way round.

2. Question 2 of 5

   When Ann's husband died, he left everything to her and used none of his nil rate band. Ann dies leaving £800,000 (no residence) to her nephew. How much IHT is due?

   Option A: £60,000Option B: £320,000Option C: £0Option D: £190,000

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   The answer is A: £60,000

   Ann has her own NRB plus 100% of her husband's unused NRB: £650,000. £800,000 − £650,000 = £150,000 × 40% = £60,000. No RNRB applies as there is no residence going to direct descendants.

   Why the other options are wrong

   B

   £320,000 is 40% of the whole estate with no nil rate band.

   C

   The estate exceeds the combined £650,000.

   D

   £190,000 only allows Ann's own nil rate band.

3. Question 3 of 5

   Clive buys a whole of life policy to pay the IHT his nephews will face. What further step should he take?

   Option A: Take the policy out on his nephews' livesOption B: Write the policy in trust for his nephewsOption C: Name his estate as the policy beneficiaryOption D: Assign the policy to his bank as security

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   The answer is B: Write the policy in trust for his nephews

   Writing the policy in trust keeps the proceeds outside his estate, so they don't add to the IHT bill and reach the nephews quickly.

   Why the other options are wrong

   A

   The policy needs to pay out on Clive's death, when IHT arises.

   C

   Paying into the estate would increase its value for IHT.

   D

   Assigning to a bank would be for loan security, not IHT planning.

4. Question 4 of 5

   Which of the following is NOT one of the four main approaches to tax planning for investors?

   Option A: Delay filing tax returns to defer paymentOption B: Make the maximum use of allowances and exemptionsOption C: Choose investments qualifying for tax relief on the amount investedOption D: Choose investments suited to the investor's own tax position

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   The answer is A: Delay filing tax returns to defer payment

   The four approaches are using allowances and exemptions, matching investments to the tax position, choosing tax-free returns, and using investments with tax relief. Late filing leads to interest and penalties.

   Why the other options are wrong

   B

   Using allowances and exemptions is one of the four approaches.

   C

   Using investments that qualify for tax relief is one of the approaches.

   D

   Matching investments to the investor's tax position is one of the approaches.

5. Question 5 of 5

   When does the UK tax year run?

   Option A: 6 April to 5 AprilOption B: 6 January to 5 JanuaryOption C: 1 April to 31 MarchOption D: 1 January to 31 December

   Show answer

   The answer is A: 6 April to 5 April

   The tax year runs from 6 April to 5 April the following year. Many allowances renew on 6 April, so timing around year end matters.

   Why the other options are wrong

   B

   The tax year starts on 6 April.

   C

   1 April to 31 March is the year used for some business reporting, not the personal tax year.

   D

   The tax year doesn't follow the calendar year.

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