Paying IHT

Inheritance tax is normally due 6 months after the date of death. It is normally payable from the estate at death. The recipient won’t normally pay the tax unless:

a)      The will specifies that the person receiving the gift will pay any tax due on the gift

b)      There are insufficient funds in the estate with which to pay the tax

Where a major asset is property (and in limited other cases) the person who is due to pay the tax may arrange to pay the tax due over 10 years. This applies so long as the property is not sold. If it is sold, the balance of the inheritance tax owing becomes payable at once.

Example: Derek inherits his mother’s house worth £450,000. There is no cash in his mother’s estate to pay the tax. Derek can arrange with HMRC to pay the tax due over 10 years. Interest will be due on the outstanding tax.

For details please see http://www.hmrc.gov.uk/inheritancetax/paying-iht/index.htm

There is guidance on the HMRC website about the forms you may need to complete when someone dies. These forms will notify HMRC of any tax that is owing on the estate and gifts within the previous 7 years (see http://www.hmrc.gov.uk/inheritancetax/iht-probate-forms/index.htm).