Usually the executor or personal representative for the person who has died pays Inheritance Tax using the funds from the estate. Trustees are responsible for paying Inheritance Tax on trusts, which are a way of looking after assets (money, investments, land or buildings) for people. The trustee is the person who looks after the trust.
If you get an inheritance or a gift from someone who has died you only owe Inheritance Tax if their estate is more than £325,000 and either it says in the will that you should pay Inheritance Tax or the deceased’s estate hasn’t or can’t pay it. If you’re the executor of an estate you need to work out if you need to pay Inheritance Tax. To get a ballpark figure, you add up the value of everything in the estate – including gifts made in the last 7 years before the person died – and take away any debts, like bills and funeral expenses. If the total remaining exceeds the Inheritance Tax Threshold, tax may be due. ‘Gifts’ can include items such as property passed on to children.
You usually have to pay Inheritance Tax within 6 months from the end of the month in which the person died – after this, you have to pay interest. Whether or not you have to pay Inheritance Tax on the estate, you’ll still have to fill out certain forms. Sometimes it can take more than 6 months to deal with the deceased’s details and start paying Inheritance Tax. If you make an early payment as an estimate, you won’t have to pay interest on the amount you pay. You may also earn some interest if you end up overpaying.
The threshold and rate of inheritance tax are subject to change and can be altered by the government, typically during the budget. There are also many specifics in the UK Inheritance Tax legislation about allowable deductions and exemptions which can reduce the value of the deceased’s estate and the liability for inheritance tax. HMRC produces more detailed information, available on-line.
