Estimating how much liability you could leave behind for your loved ones Usually the ‘executor’ of a Will or the ‘administrator’ of the estate pays Inheritance Tax (IHT) using funds from the estate.
An executor is a person named in the Will to deal with the estate – there can be more than one. An administrator is the person who deals with the estate if there’s no Will. Trustees are responsible for paying IHT on trusts.
WORK OUT IF INHERITANCETAX IS DUE ON AN ESTATE
To estimate how much IHT you could have to pay, add up the value of all your wealth, subtract your liabilities and the £325,000 nil rate band allowance, and then multiply the remainder by 40%.
If you are married or in a registered civil partnership, add up your combined estates and reduce these by two nil rate band allowances of £325,000 each (£650,000) before applying the 40% rate to estimate your potential liability to IHT. Married couples and registered civil partners are allowed to pass their possessions and assets to each other tax-free, and, since October 2007, the surviving partner is now allowed to use both tax-free allowances (providing one wasn’t used at the first death). Gifts made within the last seven years are not included in the calculations but may be liable to IHT on a sliding scale.
The calculation for valuation of your estate is for your general information and use only and is not intended to address your particular requirements. It should not be relied upon in its entirety and shall not be deemed to be, or constitute, advice. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation.
If IHT is due on the estate, you would need to complete HM Revenue & Customs (HMRC) form IHT400. You may also need to send other forms at the same time. If no IHT is due, you’ll need to complete form IHT205 to tell HMRC that no IHT is due on the estate. 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 IHT 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 IHT in instalments over 10 years on things that may take time to sell, for example, property and some types of shares. There are different deadlines for paying IHT on a trust.