When is Inheritance Tax Paid after a death?
If I am made executor of my father’s will. When is inheritance tax paid on his estate, does this have to be paid before probate is granted? If so, do I have to find the money to pay it from my own resources or can I access his funds to pay it?
When is Inheritance Tax paid after a death?
When is Inheritance Tax paid – IHT must be paid (normally) before the grant of probate is issued. In other words, IHT has to be paid before you have access to your fathers money!
If there is property involved HMRC will accept staged payments of Inheritance Tax (until the property is sold) at least on the property.
Banks etc will often release money direct to HMRC when Inheritance Tax is to be paid, but failing that you do have to borrow it unless HMRC will accept your undertaking to pay ASAP.
Any farming or business assets may be fully or partially exempt, and indeed there are many other exemptions and traps.
Delay is fatal because they will start charging penalties and interest on the amount of Inheritance tax which should have been paid.
If your fathers health is good, he may be able to take out life insurance to pay the Inheritance Tax, but it isn’t cheap. If he doesn’t have an IFA to advise him, let me know and I am sure we can find one near him who understand the intricacies of Inheritance Tax Planning. You could do worse than buy my book at www.Inheritance-Tax-Secrets.co.uk!
Extracts from the book:
21. Inheritance Tax paid by instalments (normally on property)
if you qualify, go for it but make sure the funds are guaranteed, as the Executor remains liable until the tax is paid in full! Interest free over 10 years or until the property is sold is a big benefit – well it was until recently – but the revenue have increased that to 2.5% over the bank of England base rate. Whilst the base rate is at 0.5% that is no big deal, but if base rate hovers around an average of 5.5% that’s a whopping 8% per year charge on late payments.
Deadline for paying Inheritance Tax
In most cases, you must pay Inheritance Tax within six months of the end of the month in which the deceased died. After this, interest and penalties will be charged on the amount outstanding.
You can pay in yearly instalments over ten years if the value of the estate is tied up in property such as a house.
The due dates are different if you’re paying Inheritance Tax on a trust.