Specialist advice is best for Inheritance Tax and Inheritance Tax planning. We have set out some basic details below. You can also visit the HMRC Website for more details and the links on this page will take you there.
Inheritance Tax is paid if a person’s estate (their property, money and possessions) is worth more than £325,000 when they die. This is called the ‘Inheritance Tax threshold’.
Planning is essential if you have a sizeable estate. Allowances can be passed on to a spouse and you can now take advantage of a residence nil rate band that, for a couple, could amount to £1m being passed on tax free.
There are different thresholds for previous years.
Inheritance Tax rates
The rate of Inheritance Tax is 40% on anything above the threshold. The rate may be reduced to 36% if 10% or more of the estate is left to charity.
Who pays Inheritance Tax
Usually the ‘executor’ of the will or the ‘administrator’ of the estate pays Inheritance Tax using funds from the estate.
Trustees are responsible for paying Inheritance Tax on trusts.
If you’ve received an inheritance, you usually don’t pay Inheritance Tax. There are some exceptions. You may still have to pay other taxes.
You may have to pay Inheritance Tax if someone who died gave you a gift while they were alive.
Work out if Inheritance Tax is due on an estate
Work out how much the estate is worth to find out if the estate needs to pay Inheritance Tax.
| Inheritance Tax to pay | England, Wales and Northern Ireland | Scotland |
|---|---|---|
| No | Fill in form IHT205 | Fill in forms C5 and C1 |
| Yes | Fill in form IHT400 | Fill in forms IHT400 and C1 |
You may need to send other forms at the same time.
You or your solicitor will need to send the forms with your application for probate (‘grant of representation’). This is called ‘confirmation’ in Scotland.
The grant of representation (‘confirmation’) gives you the right to deal with the estate as the executor or administrator.
Deadline for paying Inheritance Tax
The executor of a will or administrator of an estate usually has to pay Inheritance Tax by the end of the sixth month after the person died.
After this the estate has to pay interest.
You can make early payments before you know what the estate owes. Interest isn’t due on this amount.
You can pay Inheritance Tax in instalments over 10 years on things that may take time to sell, eg property and some types of shares.
There are different deadlines for paying Inheritance Tax on a trust.