Paying Inheritance Tax
Paying Inheritance Tax
Contents
Paying Inheritance Tax
If you are acting as someone's personal representative, you need to value all of the assets (property, possessions and money) that the deceased person owned to work out whether any Inheritance Tax is due. Inheritance Tax is only payable if a deceased person's estate is worth more than the general nil rate band which is currently £325,000, plus the amount of any available residence nil rate band.
Valuing the estate for Inheritance Tax purposes
You need to carry out the valuation of the deceased person's estate assets before applying to the Sheriff Court to be permitted to take over management of their estate (called applying for 'Confirmation'). If Inheritance Tax is due on the estate, Confirmation won't be issued until at least some of the tax has been paid.
Forms you need to complete
There are different forms to complete, depending on the value of the estate. You can learn more about how to apply for Confirmation (Authority to manage the estate) in our related articles.
| Required forms if Inheritance Tax is unlikely to be due ('excepted estates') | Required forms if you expect Inheritance Tax to be due |
|---|---|
|
Form C1(2021) ('Inventory') and form C5 if they died on or after 1 September 2006 and on or before 31 December 2021; otherwise form C1(2022) only |
Form C1 ('Inventory') Inheritance Tax form IHT400 |
There are additional supplementary forms that accompany the IHT400. Use the IHT400 help notes to help you decide which you need to complete.
Deadline for paying Inheritance Tax
In most cases, Inheritance Tax must be paid within six months from the end of the month in which the death occurs; otherwise interest is charged on the amount owing.
Tax on some assets, including land and buildings (including the deceased person's house), can be deferred and paid in equal instalments over 10 years, but interest will be charged in most cases. This method is called 'the instalment option'.
How you make the payment
You can pay the Inheritance Tax due using any of the following methods:
- Cheque, electronic bank transfer or Giro cheque (from any joint account you held with the deceased)
- Any of the above methods from your own account (you would then reclaim the money from the estate once you have obtained the confirmation)
- Directly from the deceased person's bank or building society account(s) using the Inheritance Tax direct payment scheme (not available where funds are in a joint account)
- Using British Government Stock held in the deceased's name
- Using National Savings investments held in the deceased's name
Confirmation of completed Inheritance Tax payment
Once you have paid all the Inheritance Tax, or the required instalments if you have elected for the instalment option and any interest due, you can ask HMRC to issue you with a 'clearance certificate'. The clearance certificate confirms that (subject to certain conditions) no further tax is due. To request the certificate, you need to complete form IHT30. You can also request this certificate if you've chosen to pay by instalments. HMRC, however, have stated that in most cases there is no longer any need to apply for that certificate as they will instead in all cases issue a closure letter which will be treated in all respects exactly the same as a clearance certificate.
Paying Inheritance Tax on lifetime gifts or transfers
If the person died within seven years of making a gift, or transferring assets into a discretionary trust or company, those assets will count as part of their estate and Inheritance Tax may be due on them. If Inheritance Tax is due, the person or 'transferee' who received the gift or assets is normally liable to pay the Inheritance Tax. Any Inheritance Tax already paid at the time of a transfer into a trust or company will be taken into account. The executor would need to let the relevant people know if Inheritance Tax is due. Read the detail on HMRC's website by clicking on the following link: HM Revenue and Customs