What is Inheritance Tax? - This is a tax payable on:
- The taxable value of the estate depends on the tax rates and thresholds. Current information can be obtained from the Inland Revenue.
- Inheritance tax is paid at the rate of 40% of any excess over the inheritance tax threshold (currently set at £275,000). The sum up to the threshold is known as the "nil-rate band".
- Payment is usually made by the person nominated to handle the affairs of the deceased (known as the "personal representative"). In some cases, children or heirs can find themselves having to pay the tax bill out of their own funds.
- Inheritance tax is due 6 months after the end of the month of death (although the account is not required to be submitted for 12 months after the end of the month of death).
- Any inheritance tax due by the executors must be paid before Confirmation can be obtained.
- In the event that Confirmation has yet to be obtained, it may be necessary to request a loan from a bank in order to pay the tax. Once Confirmation is obtained, the loan is repaid from the estate. Sometimes a bank or building society will issue a cheque payable to the Inland Revenue out of money held in the account of the deceased.
- It is also possible to buy National Savings items to pay the tax. Contact the Department of National Savings for more information.
- No tax is payable where the whole estate is left:
- between husband and wife and the survivor has their permanent home (domiciled) in the UK.
- to UK charities.
- From the inheritance tax outstanding, deductions are made for:
- outstanding bills
- funeral costs
- As inheritance tax can be complicated, it may be advisable to seek some professional help if necessary. Inheritance tax forms and leaflets are available from the Inland Revenue.
- In Scotland, inheritance tax is administered by the Capital Taxes Office (Meldrum House, 15 Drumsheugh Gardens, EDINBURGH EH3 7UG. Helpline numbers: 01331 777 4050/ 01331 777 4060).
NB: A late payment of inheritance tax without a reasonable excuse will incur a penalty.
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