What are the three types of Inheritance Tax (IHT) transfers?

The correct answer identifies the three types of Inheritance Tax (IHT) transfers as potentially exempt transfer, chargeable lifetime transfer, and exempt transfers.

Potentially exempt transfers are gifts inter vivos (made during a person’s lifetime) that are exempt from IHT if the donor survives for seven years following the gift. This incentivizes people to make gifts without an immediate tax burden, as long as they survive the applicable period.

Chargeable lifetime transfers refer to gifts that exceed the annual exemption allowance and may incur an immediate IHT charge. These transfers are relevant for those who are making significant gifts or transfers, as they can affect the amount of wealth that is taxable upon death.

Exempt transfers include certain gifts that fall under specific categories defined by tax laws, such as gifts made to charities or gifts to spouses or civil partners, which do not incur any tax liability. Understanding these distinctions is essential for taxpayers to effectively manage their estate planning and understand their tax obligations.

The other options presented do not accurately represent the classification of IHT transfers. For instance, gift tax transfers and charitable donations do not align with the specific terminology used in inheritance tax law, and the combination in the third option does not capture the full scope of IHT transfer types recognized in