Paying Inheritance Tax
When you pass away, if your estate is valued at more that £325,000, anything over that threshold is likely to be taxed at a rate of 40%, this tax is know as inheritance tax.
With good forward planning there may be ways of reducing or avoiding inheritance tax, depending on your individual circumstatnces.
Who is responsible for paying inheritance tax?
Paying inheritance tax is usually the responsibility of the executor, administrator or personal representative of the deceased person. However, there may be times when this is not the case.
A trustee may need to pay inheritance tax already held in trust. In this case inheritance tax may be payable if a transfer is made out of a trust, every ten years after the initial transfer into the trust or when the trust beneficiary dies.
A beneficiary may have to pay inheritance tax if the trustees or executors cannot. This applies if the beneficiary has received a taxable gift within the last seven years of the life of the deceased person, they receive a share in the estate, they benefit from assets held in trust, or if they were in joint ownership of a property with the deceased person (who is not a civil partner or spouse).
A settlor will normally pay any inheritance tax due on assets transferred into a trust. A settlor is usually the person who made the transfer.
What are the deadlines for paying inheritance tax?
Any inheritance tax that is due should usually be paid within six months of death. The six month period is measured from the end of the month in which the death occurred. However in some cases inheritance tax may be payable over a ten year period if the assets are in the form of property. After the six months period interest may be charged on any unpaid amounts.
Different rules may apply to any assets held in trust.
How do I go about paying inheritance tax?
Inheritance tax may be paid from a variety of different sources, including:
- The bank account or building society of the deceased person.
- Transferring a National Trust Property to the crown.
- Any National Savings and Investments held by the deceased person.
- Any government stock held be the deceased.
- National heritage property.
- Your own personal funds.
If you pay inheritance tax for someone else you will be able to claim it back.
If you would like advice on paying inheritance tax tailored to your own individual circumstances speak to a member of an independent inheritance tax planning advice team for a free initial no obligation consultation.
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