Paying Inheritance Tax

May 18, 2022 | Estate Planning

For those dealing with someone’s estate after their death, the Inheritance Tax bill can come as a nasty shock. It needs to be paid before a Grant of Probate or Letters of Administration are applied for, which can sometimes create difficulties.

The current Inheritance Tax threshold is £325,000, meaning that where more than this sum is left in an estate, Inheritance Tax will need to be paid on the amount in excess of the threshold at the rate of 40%.

​There are some exceptions to this, for example, where an individual leaves everything to their spouse or civil partner, no Inheritance Tax is payable. When the spouse or civil partner dies, their estate can also benefit from any unused Inheritance Tax allowance from the estate of the first to die.

How to calculate Inheritance Tax

Inheritance Tax calculations can be complex. The estate’s personal representative will need to value the deceased’s estate and also identify any gifts of value that the deceased made in the seven years before their death. Where the estate is liable for Inheritance Tax, tax is payable on some gifts of cash or items of value on a sliding scale, available on the government’s website.
All items of value will need to be included in the estate valuation, such as property, cars, jewellery, art, shares, Premium Bonds and investments. Their value as at the date of death should be listed on the HM Revenue & Customs (HMRC) forms. You can obtain professional valuations for some chattels, such as art or jewellery. For other assets such as property or cars, you may be able to obtain a figure by looking at the sale price of similar items.
Where there is an unused Inheritance Tax allowance, this can be applied against the gross value of the estate along with the deceased’s own allowance.
There is also an allowance in respect of the deceased’s residence, if this is left to direct descendants such as children or grandchildren. This is in the sum of £175,000. Again, if this was not used by the deceased’s late spouse or civil partner, the unused allowance can be put against the deceased’s estate.
Where the deceased left 10% or more of their estate to charity, their Inheritance Tax rate will drop to 36%.

When is Inheritance Tax payable?

Inheritance Tax should be paid at least fifteen working days before an application for a Grant is made to the Probate Registry. Before Inheritance Tax can be paid, you need to ask HMRC for an Inheritance Tax reference number. It will take them up to three weeks to issue this.
Once the reference number has been received, it can be used to pay the Inheritance Tax. A number of forms will also need to be sent to HMRC at the same time, giving full details of the deceased’s estate.
There is a deadline for payment of Inheritance Tax of the end of the sixth month after the person died. If this is not met, then HMRC will charge interest.

How to fund an Inheritance Tax payment

Most people do not have enough available cash to cover an Inheritance Tax bill, which can potentially cause difficulties as investment companies will not generally release funds until they have been given a Grant of Probate or Letters of Administration. In turn, the Grant will not be issued until Inheritance Tax has been paid.
There are a number of ways around this. Firstly, if the deceased held money in a bank or building society account, it may be possible to ask them to release funds to HMRC to pay the Inheritance Tax directly. British government stock can also be used to pay Inheritance Tax.
In some cases, it is possible to pay Inheritance Tax in equal annual instalments over a period of ten years. This is only an option where the estate includes something that would take some time to sell, such as a property or shares. Interest will generally be payable on the outstanding amount and you will be required to clear the Inheritance Tax bill in full once the assets have been sold.
This can also be used if you are intending not to sell a house because you wish to keep it and live in it yourself.
Dealing with Inheritance Tax can be complex and it is generally recommended that you seek legal advice to ensure that your calculations are correct and that the accompanying forms include all necessary information.

Contact us

If you would like any further advice regarding Inheritance Tax or any other estate planning matter, please call us on 01252 268862 or email: marie@mgfwills.co.uk

Or, if you’d rather arrange a face to face appointment:

Hannah Dunmall
Hannah Dunmall
04/03/2021
Verified
I would highly recommend MGF. Marie guided us kindly and professionally from the first initial phone call to the final signing. She provided an un-pressured, user friendly service, that was very personal and efficient. We were very ignorant around the whole subject of wills and lasting powers of attorney, but Marie always made us feel that no question was a stupid one, and gave her time and attention to ensure we understood all that was involved. We have peace of mind now that we have everything in order, and wouldn’t hesitate to recommend Marie.
Nicole Falleur
Nicole Falleur
26/02/2021
Verified
I found this lady's business on an online search for a local will writer / solicitor for my Mother & I to write our wills after having not so positive experiences with previous companies we'd tried & Mum preferred to relate to a lady & I found that she was in our area & the only 1 who had 100% 5* Star ratings from all her customers who'd left reviews ! So we contacted her & went from there ! 🙂 We could not have found or wished for anyone better ! She offers such a personal service & is so easy to communicate with & is very knowledgeable & goes "the extra mile", nothing seems too much trouble & despite being a very busy woman, she gives as many extra hours of her time as her clients need & she does it all at a set fee ! She does not charge extra add on, additional charges for every hour, phonecall, Zoom call, visit, paperwork she does for you, she keeps to the very competitive price she quoted at the outset, which we found most unusual & refreshingly nice & welcome & very much appreciated indeed, no hidden charges or fear of nasty, frightening financial surprises ! She is such a very lovely person, personable, natural & relaxed to deal with, competent & efficient, keeps her word & punctual, doesn't let you down. We couldn't find better & she truly exceeded our expectations & we will use her again as she offers multiple legal services as listed on her website. Thank you Marie !
Victoria Shortland
Victoria Shortland
26/02/2021
Verified
Fabulous service from MGF Wills and Estate Planning. Marie was very helpful and answered our many many questions very patiently! I felt that Marie really knows her stuff and is very reasonably priced. Highly recommended.
Mr Clive Wills
Mr Clive Wills
12/02/2021
Verified
My wife and I had Mirror Wills drawn up. Marie was very professional, friendly and excellent communication throughout. She talked us through all aspects of wills. A very straightforward process and job done promptly. Completed in a Covid safe way. We would definitely recommend MGF.
Lissy Evett
Lissy Evett
11/02/2021
Verified
My objective was to find a good and affordable Will writing service that could accommodate me in a timely manner. I found all of those things with Marie Forkner, from the MGF Wills & Estate Planning Service. Great customer service, professional, knowledgeable, and friendly. I highly recommend MGF Wills & Estate Planning Service. Excellent!
Kerry Davis
Kerry Davis
01/02/2021
Verified
Please do not hesitate in using MGF Wills. Excellent, knowledgeable service with unbiased advice and guidance. Look no further for your future planning needs. Highly recommended to anyone considering Will writing/storage etc. Wouldn’t hesitate recommending to friends and family A*.
Doug
Doug
24/01/2021
Verified
We would highly recommend MGF Wills. We had a will made last year. Marie was thorough, patient and willing to answer all our questions. There was no pressure put on us. Pricing was clear from the start. Highly recommended.
Carruthers Family
Carruthers Family
20/01/2021
Verified
Friendly advise & clear directions making completing our 1st Wills very straight forward. Have already recommended to a friend. It didn’t matter that it was all completed over the phone rather than face to face.
Mark C
Mark C
18/01/2021
Verified
Great service, competitively priced and quick turn around time. Marie explained everything clearly and was very knowledgeable. Would definitely recommend.
Mark Smith
Mark Smith
13/01/2021
Verified
Marie drew up the wills for my partner and I. She was professional and accommodating throughout the entire process. Everything was explained clearly and there was no such thing as a silly question. She even took the time to walk us through the signing process with our neighbours! We would thoroughly recommend Marie and will be using her in future if and when we need to update our wills.