When is Inheritance Tax paid or at least Due after a Death?

When is Inheritance Tax Paid after a death?

This page is more about the necessity for URGENT action where inheritance tax is or might be payable after a death. The deadlines are very tight, and the potential penalties for getting it wrong are severe. We would suggest you identify the need for professional support at the earliest possible moment and contact us. Here are some examples of potential IHT penalties:

  • if a penalty arises because of a lack of reasonable care, the penalty will be between 0% and 30% of the extra tax due.
  • If the error is deliberate, the penalty will be between 20 and 70% of the extra tax due
  • If the error is deliberate and concealed, the penalty will be between 30 and 100% of the extra tax due.
  • There are also additional penalties for lateness.
  1. Nil Rate Band Allowance.
  2. Residence Nil Rate Band.
  3. Transferable Nil Rate Band.

How soon after death do you have to pay inheritance tax?

Inheritance Tax (IHT) must be paid by the end of the sixth month after the person’s death. If it is not paid within this timeframe, HMRC will start charging interest and potentially penalties too.   So don’t hang about or it could be expensive – if you feel you need professional help, we can put you in touch with sensibly priced help.

Sounds simple, but bear in mind it may take you 3 weeks to get a reference number from HMRC so that you can pay.

You also have to have a firm grip on the value of the assets and of the total value of liabilities in the estate.  That can take a long time, and it is surprising how often you will be given incorrect figures by Institutions who should know better. Many of them will take weeks to reply, leaving you little time for questioning things you don’t understand in their replies.

How do I pay Inheritance Tax if there is no money in the Estate?

Many institutions will make direct payments to HMRC towards IHT bills before the Grant of Probate is issued.  You will have to fill in a form IHT423 for each bank that will be making payment and then send this to the banks at the same time as you send the full tax return (known as form IHT400) to HM Revenue & Customs. Of course, you need to have the IHT Reference Number before you can do that.

Where the problem is that most of the estate is in property that you can’t sell until probate is granted, HMRC will potentially allow the inheritance tax to be paid in half-yearly instalments over up to 10 years. You may have to arrange for a loan to pay the first one due 6 months after the month in which the death occurred, but fail to do so and they will charge interest and potentially penalties. As soon as the property is sold, the full IHT bill must be paid.

When is Inheritance Tax paid after a death?

When is Inheritance Tax paid – IHT must be paid (normally) before the grant of probate is issued.  In other words, IHT has to be paid before you have access to the inheritance money!

If there is property involved HMRC will accept staged payments of Inheritance Tax (until the property is sold) at least on the property.

Banks etc will often release money direct to HMRC when Inheritance Tax is paid, but failing that you do have to borrow it unless HMRC will accept your undertaking to pay ASAP plus interest.

Any farming or business assets may be fully or partially exempt, and indeed there are many other exemptions and traps.

Delay is fatal because they will start charging penalties and interest on the amount of Inheritance tax that should have been paid.

Extracts from the book:

21.   Inheritance Tax paid by instalments (normally on property)

if you qualify, go for it but make sure the funds are guaranteed, as the Executor remains liable until the tax is paid in full!  Repayable over 10 years or until the property is sold is a big benefit – but the revenue has increased the interest rate that to 2.6%.  If you overpay, you won’t get more than 0.5% on the money you have inadvertently lent to HMRC!

Deadline for paying Inheritance Tax

In most cases, you must pay Inheritance Tax within six months of the end of the month in which the deceased died. After this, interest and penalties will be charged on the amount outstanding.

You can pay in yearly instalments over ten years if the value of the estate is tied up in property such as a house.

The due dates are different if you’re paying Inheritance Tax on a trust.

When is Inheritance Tax paid?

Probate IHT: Inheritance Tax on Death. Danger!

Probate IHT: Inheritance Tax on Death: when is it payable?

Inheritance Tax on death
IHT 400 Schedules (some!)

IHT is often called “death tax” makes the process of obtaining a grant of probate much more complex and dangerous for the executors. A much higher proportion of such estates are called in to be examined in detail by the taxman, as large sums of Inheritance Tax are at stake. Missing out a gift or trust which should have been included can involve tax penalties on both the estate (and the executor personally) if the taxman feels they have been careless or worse still, less than honest.  For those with time left to plan, see item 11 on this page. If not, then one of the tools we can introduce you to is the Deed of Variation.  But there are many more.

A potted summary of this page – if an IHT400 is required, or you expect IHT to be payable, contact us to find economical professional help!

DANGER: Inheritance Tax is payable WITHIN 6 MONTHS of the first of the month after the death occurred.

This is probably the main concern, as the executors must pay the Inheritance Tas BEFORE probate can be granted, and before that, they have little access to funds, which are often tied up in property. Some banks and other institutions will release funds direct to the taxman before probate, on the understanding that it is to go towards IHT.  Also, HMRC generally agrees to take instalments over up to ten years if liquid funds are not available.  This means that the executors may need to find as little as 5% of the IHT due before the deadline, with the next 5% due 6 months later.  If the property is sold or transferred, the full IHT bill must be settled.  As an example of timing, a death on 1st January would require cleared payment to the taxman no later than the end of July. Some executors are forced to take out loans to avoid penalties.

The forms required where Inheritance Tax is potentially an issue are much more complex both in the questions asked and the length of them.  You can download the main IHT 400 here, but don’t forget the extensive range of supplementary questionnaires!

We are almost uniquely able to help take the load off you, with our range of professional connections. They can sort out the estate, hopefully saving some IHT along the way and help the beneficiaries with their own Estate and Inheritance Tax Planning (if they wish.) And having independent executors takes the strain off family relationships.  But it is possible you won’t need a grant of probate.  If so, it is a good time to ask for our (indirect) help in putting things in order for the future.

But for the first death of a married or civil registered couple leaving everything to the surviving spouse, there is usually no IHT liability. This is called the spouse exemption.  It is generally available where both parties are domiciled or deemed domiciled in the UK.

How can we help you with applying for probate or saving Inheritance Tax? 03 300 102 300.

In particular, any potential liability of the estate to Inheritance Tax opens up the possibility of large personal fines for you get it wrong.  See the IHT penalties on the HMRC site.  If you are in a position to do any, advance planning can make substantial savings, so contact us in advance for estate and inheritance tax planning if possible.  And if your estate planning has not been reviewed in the last couple of years, at least ask for a copy of our 2 Minute Guide to Estate Planning (without obligation.) Not only do you have to be quick with estate administration and IHT returns, you also need to be accurate.  You must pay the IHT before you can gain probate and are then able to access the estate assets – which can be tricky! Not understanding how investments work, or the impact of lifetime gifts (up to 14 years ago) or gifts with reservation of benefit is no excuse.  Gifts with reservation of benefit are often badly implemented IHT planning, or designed to avoid care fees.  We have experts in the office who can look after your interests and protect you. Tax and death are often inseparable, but that is no reason to pay more tax on death than is necessary.   After all, few people really want to make the Taxman their largest beneficiary (he often is) – they just fail to contact us in time to do any advance planning.

We love saving inheritance tax & probate costs.

save-IHTOur expert connections can often use rules and regulations to increase inheritances.  These opportunities are not fully understood by all probate practitioners.  We also arrange for advice on Inheritance Tax planning for the next generation if asked.   That is always the best approach – the earlier you start planning to save IHT, the easier it is. After a death, then it is time to beef up Estate Planning for the next generation – ask for our colleagues 2 Minute Review.

Inheritance Tax Advice – sounds expensive?

Not at all – we look for connections who keep their overheads way down, so you could end up paying more for help from legal professionals whose experience extends to just paying (rather than saving) Inheritance Tax.  So generally speaking, you will not only pay less, you will pay less to the Taxman as well. Contact us on our IHT Probate helpline for a brief free initial discussion on 03 300 102 300. You will appreciate that to keep costs down, the initial (free) chat will have to be brief.   You will benefit from lower fees when you instruct our contacts! But there is a lot that can still be done to reduce inheritance tax during and sometimes after the probate process is completed.  Our contacts will oversee the administration of the deceased persons’ estate with a watching brief of reducing the IHT bill wherever legally possible.

Q: How do I know I may need Inheritance Tax Advice on an Estate?

Some examples:

  • Where the estate contains a trust, you must fill in the Inheritance Tax forms.
  • Where the deceased lived in a home that they used to own but sold or gave away.
  • Where the single persons estate exceeds £280,000 (although this is below the nil rate band of IHT) HMRC may take a greater interest, just in case anything has been missed.
  • Where gifts over the (very low) tax-free allowances have been made in the previous 7 years and sometimes longer.
  • Where Inheritance Tax planning investments have been made.
  • If there are any foreign assets.
  • Where the person is not UK domiciled (i.e. they are considered by law not to have established that the UK is their permanent home, or they never intended that it should be.)  The rules are pretty tight.

Give us a ring on our Probate and Inheritance Tax Helpline 03 300 102 300 or (if it is out of office hours) use our Contact Form below. How can we help you?

Inheritance Tax Questions:

We hope these questions on estates and inheritance tax will be of use to you: feel free to contact us for a quick chat, but please be aware that we cannot give proper advice without being fully aware of the facts.  Free advice will be brief, general and informal.  If you are not happy to pay for quality advice, please do look around the rest of the site and you may find the information you need.

Q: Can I avoid Inheritance Tax?

There are many ways to reduce your inheritance tax liability, and we can organise a full review for a living person.  It may well be possible to save IHT even after someone has died, as long as we are contacted to do so quickly enough.  Sadly, our book,  “Inheritance Tax Secrets” is out of print.

Q: Do I have to pay the Inheritance Tax before I can get a Grant of Probate?

Regrettably, you do.  So the IHT has to be handed over to HMRC before you have access to much of the deceased persons’ assets.  Not exactly helpful, but we are used to working our way around these issues to the best advantage of the beneficiaries and finding ways to pay IHT before probate is granted.  Unfortunately, paying inheritance tax before probate is a legal requirement, whether we agree with it or not. But see below for IHT on property. Inheritance tax used to be called Estate Tax.

Q: How soon after death does Inheritance Tax have to be paid?

In most cases, you must pay Inheritance Tax within six months of the end of the month in which the deceased died. After this, interest will be charged on the amount outstanding. Inheritance tax is currently charged at a rate of 40% on the taxable estate. Probate and Inheritance Tax are inextricably entangled – which is a good choice of words for most estates.

Q: Inheritance Tax on Property which can’t be sold (or in time).

You can pay in half-yearly instalments over ten years if the value of the estate is tied up in property such as a house, but the balance must be paid immediately if the property is sold. The due dates are different if you’re paying Inheritance Tax on a trust.

Q: Do I have to pay tax on my inheritance from the deceased’s estate?

The responsibility of paying Inheritance Tax normally rests with the executors of the estate, so it should have been paid before you receive your inheritance.  But amateur executors can make a mess of it and underpay, so ideally don’t spend it all just in case.

What are Death Duties?

They are the name for an earlier version of Inheritance Tax, just as Estate Tax is. IHT is often called “death tax.” So Estate and Inheritance Tax are the same thing.  As someone famous once said, “nothing is certain except death and taxes.” How can we help you?  03 300 102 300 What is Probate    Deeds of Variation to save Inheritance Tax For details of Inheritance Tax rates in 2012, 2013, 2014, 2015, 2016, 2017, 2018 and so on. Paying Inheritance Tax before probate is granted can be a real problem.  With our experience, we can ease the issues as far as is possible, and make sure the grant of probate is available as soon as possible.  Saving up to pay the IHT is far from ideal!

Frequently asked questions:

Q: Do I need to pay taxes on an inheritance?

A: Normally the tax will be paid by the estate before you receive your inheritance.   However, a badly set up Last Will may be dramatically diverted from its’ original intentions if Inheritance Tax has not been taken into account.  We have a Will storage service that helps people to keep their Wills and other Legal Planning up to date as their circumstances, tax and the law change.  Not to mention those of the beneficiaries.  It is called the Peace of Mind Service.

Enquiry form Inheritance Tax and Probate.

Related information

Main Inheritance Tax Page.