FAQs About Estate Administration – When do I need to pay Inheritance Tax and how do I pay it?



In this second mini blog in this series of FAQs About Estate Administration, Kat King explains when and how Inheritance Tax (IHT) is paid

When do I need to pay IHT?

IHT must be paid by the end of the sixth month after the person died.

For example: Jack Smith dies on 15th May 2019. Inheritance Tax must be paid by 30th November 2019.

IHT is usually paid when the application for a Grant of Probate is made. The Grant will only be issued once IHT has been settled.

Will interest accrue if I don’t pay on time?

If IHT is not paid on time, HM Revenue and Customs (HMRC) will charge interest on the amount due. The current interest rate is 3.25%.

As interest rates have changed over the years, it is best to calculate the amount of interest due using the calculator on the HMRC website:

http://www.hmrc.gov.uk/tools/inheritancetax/interest-rate-calculator.htm

How can I pay IHT?

IHT can be paid in a variety of ways, for example, by bank transfer or cheque.

However, it is quite often the case that IHT is payable in estates where a Grant of Probate is required to encash the assets. In order to obtain the Grant, IHT must be paid first. Sounds like a “catch 22” situation? There is a procedure allowing IHT to be paid before the Grant is issued, and your solicitor will be able to assist you with this process.

Can I pay IHT in instalments?

Yes, it is possible to pay IHT on certain assets, which usually take time to sell (e.g. a house), in instalments spread over 10 years.

If this option is chosen, interest will accrue on the instalments. However, once the asset has been sold, IHT can be paid in full, so that no further interest is accruing.

The first instalment is due by the end of the sixth month after the person died. Each consecutive instalment is then due on the anniversary of that date until either IHT is paid in full, or all 10 instalments paid.

 

If you have any questions or want to find out more about Inheritance Tax, please contact our Tax & Trusts team on 01225 750000.