3 min Read
23 Feb 2016

Who pays inheritance tax?

how much life insurance do you needInheritance tax is paid if a deceased's estate is worth over £325,000 at the time of death. The figure of £325,000 is known as the 'inheritance tax threshold'. Any amount above the threshold will be liable to inheritance tax at the rate of 40%.

 

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There are some simple ways in which assets, including your house, can be passed on free of inheritance tax. This excellent and easy-to-read inheritance tax guide (written by award-winning financial planners) tells you how.

Avoid paying unnecessary inheritance tax

The Inheritance Tax Guide written by award-winning, independent, chartered financial planners. It will guide you through everything you should be doing now to eliminate inheritance tax.

Download the free guide

Who will calculate if there is any inheritance tax liability?

If there is a will then the executor or administrator of the will normally deal with the calculation of any liability to inheritance tax. If there is no will then the next of kin will have to deal with this issue.

Whoever is dealing with the deceased’s estate will have to apply for a ‘grant of representation’ to have the legal right to deal with the estate. Part of this process is to complete an inheritance tax form valuing the estate, this will decide if any tax is due.

Any inheritance tax due will need to be settled prior to the granting of probate which gives the legal right to distribute the deceased’s assets.

Who actually pays any inheritance tax?

Either the executor of the will or the administrator of the estate will settle any inheritance tax due from the estate prior to distribution of any assets to the beneficiaries.

If you are in receipt of an inheritance you would not normally be liable to pay inheritance tax. However, you could be liable to pay inheritance tax on gifts received from the deceased within the 7 years prior to their death.

An estate is exempt from inheritance tax if the deceased left everything to the their spouse or civil partner living permanently in the UK.

If an estate is worth less than the inheritance tax threshold of £325,000 (2016) then any unused allowance can be passed on to a spouse or civil partner resulting in a total inheritance tax threshold of up to £650,000 for married couples or civil partnerships.

Is there a deadline for paying inheritance tax?

Inheritance tax has to be paid within six months from the date of death. If unpaid within this period then the estate will be liable to pay interest on the amount due.

It is possible to pay inheritance tax over a period of up to ten years for assets that are particularly difficult to sell. This would typically be property, shares or other business assets.

Article overview

Key points

  • It is possible to avoid paying inheritance tax on your estate (including on your property). Full details can be found in this easy-to-read inheritance tax guide (written by industry experts)
  • Who will calculate if there is any inheritance tax liability?
    • If there is a will then the executor or administrator will do it. If there is no will then the next of kin will have to perform the calculation
  • Who actually pays any inheritance tax?
    • Either the executor of the will or the administrator of the estate will settle any inheritance tax due
  • Is there a deadline for paying inheritance tax?
    • Normally it has to be paid within 6 months from the date of death although for assets which are difficult to sell (such as property) you may be able to pay the inheritance tax over a ten year period

Written by Liam

Over 30 years experience in financial services, residential lettings and property sales. Director of a leading national estate agency chain, until leaving in 2008 to pursue other commercial interests. Vast experience in new business development, business change, management development and business strategy.

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