How much Inheritance Tax must be paid to HMRC from a deceased person’s estate?

How much Inheritance Tax must be paid to HMRC from a deceased person’s estate?


Paying IHT on an Estate

When someone passes away, their estate – which includes assets, money, investments and personal possessions – is transferred to designated beneficiaries, often family, friends or charities. If a Will has been made, it will specify these beneficiaries and should name an executor responsible for fulfilling the deceased’s wishes. Without a Will, an administrator must adhere to the rules of intestacy to determine rightful heirs, taking on responsibilities similar to that of an executor, and referred to as a personal representative.

Executor and administrator duties

Both executors and administrators must ensure all debts and taxes are settled before distributing the estate. This is a legally binding duty, and many choose the services of a professional, such as a Kent accountant for probate services, to manage more complex cases. Individuals like Nick Hughes specialise in estates with cross border issues and can ensure tax matters are dealt with properly when it comes to inheritance.

Understanding Inheritance Tax

Inheritance Tax (IHT) must be paid within six months of an individual’sdeath, and is calculated on an estate’s net value after debts and bequests to charities are subtracted. The current threshold – known as the nil-rate band – is £325,000; estates below this value are exempt from IHT, though tax forms might still be required.

For married couples or civil partners, no IHT is due if the estate is left entirely to the surviving spouse. Upon the death of both partners, the nil-rate band of both individuals is combined, giving beneficiaries up to £650,000 of tax-free inheritance. IHT is paid at a standard rate of 40% on any amount in excess of this.

Calculating and paying IHT

The executor or administrator calculates IHT, considering deductions like debts and charitable donations. Factors complicating this calculation include property valuations and gifts exceeding £3,000 made in the seven years prior to death. The estates of non-UK domiciliaries, or the possession of offshore assets may also result in more complex calculations.

Payment deadlines

Inheritance Tax must be paid within six months of an individual’s death, with interest charged on late payments. A grant of probate, which allows estate distribution, is only issued after IHT is settled, making timely payment crucial to avoid delays and potential disputes among beneficiaries.

Other Taxes

The deceased’s estate may also owe Income Tax on earnings up to their death, and Capital Gains Tax (CGT) on any assets whose value has increased since their initial probate valuation. Beneficiaries inherit assets at their probate value and are liable for CGT on any increase, necessitating accurate tax returns for the estate. This is another area in which a Kent tax advisor can assist, ensuring all payments are made in full and on time.

Consequences of non-compliance

Executors and administrators bear the legal responsibility of correctly assessing and paying taxes from the estate. Incorrect handling can lead to personal liability for any outstanding amounts if the estate has already been distributed. As such, those dealing with large or intricate estates often seek professional help.


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