Inheritance Tax Payments

Here are some important facts you should be aware of regarding inheritance tax.

An Inheritance Tax bill can be a shock to those dealing with an estate following the death of a loved one. This fee must be paid prior to the application for a Grant of Probate or Letters of Administration, which may cause some difficulties.

A person leaving an estate with more than £325,000 must pay Inheritance Tax on the amount in excess of the threshold at the rate of 40% on the amount above this threshold. The Inheritance Tax is not payable when an individual leaves everything to their spouse or civil partner, for example. It is possible for the spouse or civil partner's estate to benefit from any unused Inheritance Tax allowance from the estate of the first to die when the spouse or civil partner passes away.

The calculation of inheritance tax

There can be a great deal of complexity involved in inheritance tax calculations. As part of the estate administration, the personal representative is responsible for valuing the estate of the deceased and identifying any gifts of value that the deceased made within the seven years prior to their death. On a sliding scale, available on the government's website, tax is payable on some gifts of cash or items of value where the estate is liable for Inheritance Tax.

A comprehensive estate valuation must take into account all items of value, including real estate, motor vehicles, jewellery, artwork, shares, Premium Bonds, and investments. Forms provided by HM Revenue & Customs (HMRC) should include the value of their assets at the time of death. A professional valuation can be obtained for some chattels, such as art or jewellery. Similarly, the sale price of similar assets may provide you with an estimate for other assets such as property or cars.

The Inheritance Tax allowance that has not been used can be offset against the gross value of the estate along with the deceased's own allowance.

Similarly, direct descendants such as children or grandchildren may be entitled to receive an allowance in respect of the deceased's residence. It is in the amount of £175,000. It is also possible to apply the unused allowance against the estate of the deceased if it was not utilized by the deceased's late spouse or civil partner.



The Inheritance Tax rate will drop to 36% if at least 10% of the deceased's estate is left to charity.

Inheritance Tax: When is it due?

Prior to making an application for a Grant to the Probate Registry, the Inheritance Tax must be paid at least fifteen working days in advance. It is necessary to obtain an Inheritance Tax reference number from HMRC before paying inheritance tax. They will issue this within three weeks.

It is possible to pay the Inheritance Tax once the reference number has been received. Also, HMRC will need to receive a number of forms detailing the estate of the deceased at the same time.

Inheritance Tax must be paid by the end of the sixth month following the death of the deceased. HMRC will charge interest if this requirement is not met.

Inheritance tax payments: How to fund them

The majority of people do not have sufficient cash to cover an inheritance tax bill, which can pose a problem since most investment companies will not release funds until they have received a Grant of Probate or Letters of Administration. Consequently, the Grant will not be issued until the Inheritance Tax has been paid.

Several options exist for resolving this issue. It may be possible to request the bank or building society to release funds to HMRC in order to pay the Inheritance Tax directly if the deceased had money in his or her account. Inheritance Tax can also be paid with British government stock.

The Inheritance Tax may be paid in equal annual instalments over a period of ten years in some circumstances. A property or shares that would take some time to sell would be a good candidate for this option. After the assets have been sold, you will be required to pay the Inheritance Tax bill in full and interest will be charged on the outstanding amount.

As an alternative, you may wish to use this if you wish to keep a house and live in it yourself rather than sell it.

It is generally recommended to seek legal advice when dealing with Inheritance Tax to ensure that your calculations are correct and that all necessary information is included on the accompanying forms.

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