Inheritance Tax: A Prompt Deadline

For many people, it is extraordinary how quickly 6 months can pass by. Since joining Bishop Fleming’s probate team, it has surprised me that this short length of time is all you have to pay any inheritance tax (IHT) arising on someone’s estate before interest charges start to apply. 

What are the deadlines? 

With probate and IHT, the two key deadlines are the payment of the tax, and the filing deadline for the IHT forms. These two things must be done before it is possible to apply for probate.

If the deceased’s estate is subject to an IHT liability, the executors will have six months from the end of the month of death to pay the IHT. 

As an example, if the death occurred on the 6th of March, the IHT should be paid by the 30th of September. 

The first stages of the probate process involve identifying and valuing the assets in the estate, before being able to calculate the inheritance tax liability.

This can be both a complicated and lengthy process, so 6 months is not a long time, especially when taking into account the fact that if the executors are close family, they will be grieving themselves and therefore perhaps not able to start dealing with the estate immediately. 

Given that HMRC is increasing its interest rates on late payments, it is particularly important to try and meet the 6-month payment deadline if IHT is due.

From the 23 August 2022, the rate of late payment interest increased to 4.25%.

As an example, this means that if there is an IHT liability of £100,000 made six months late, £2,125 of interest will also be due. 

It is worth noting that executors can make payments of IHT on account if exact numbers are not known, to minimise the interest charges that may arise.

When must the inheritance tax forms be submitted?

The IHT400 forms must be submitted within 1 year after the death.

These are required if there is any IHT to be paid, or if the estate does not qualify as an excepted estate.  

So How Should I Prepare? 

1. Prepare Your Executors

Discuss the assets you own with your executors or create a document or spreadsheet which lists all the assets in your estate, their estimated values, and any applicable points of contact. Keep this document secure, updating it as required.

Download Bishop Fleming's Emergency Support Document here.

2. Keep Your Will up to date

Ensure your will is up to date, particularly if there have been any changes to the family (births, deaths, marriages or divorces) and ensure contact details for your beneficiaries are up to date.

It is also important to ensure that your executors are still appropriate, for example friends named many years ago may now be losing capacity or even have pre-deceased.

If you would like to find out more about your exposure to inheritance tax, please contact a member of the Estate Planning and Probate Team who will be more than happy to help.