New guidance on help to pay inheritance tax

Are you administering a loved one’s estate but can’t raise funds to pay IHT before probate is granted? 

 

You can now apply to HMRC to postpone IHT payments without having to look for a commercial loan first. If you’re successful, you can delay payment of all or part of the tax due. This follows the only announcement affecting IHT in March’s Spring Budget. 

 

Previously, some or all of the IHT on an estate was due for payment before probate was granted. To do this you can use some of your loved one’s assets, such as bank and building society accounts. However, if funds aren’t available, it can cause executors and administrators serious financial problems. 

 

HMRC’s guidance explains the process to postpone IHT payments. First you must complete an inheritance tax account form (IHT 400) to report the value of the estate. You’ll need to know how much money, property and the possessions your loved one had when they died. You’ll also need to know about debts such as mortgages and loans. This will determine whether any IHT is due. 

 

Inheritance Tax isn’t normally paid if either: 

 

If IHT is due you must start paying the tax before the end of the sixth month after someone dies. HMRC will charge interest on any IHT not paid by this date. If land or buildings are part of the estate HMRC might also place a notice of the charge against them at the Land Registry. Potential buyers would then have to make a request to remove the notices before the purchase is completed. 

 

If you, as executor or administrator, have made every effort to raise funds to pay IHT, HMRC might agree to postpone the payments. You must complete a form (IHTM 05123) to show there aren’t enough accessible assets in the estate to pay what’s due. However, from 1st April 2024 you won’t have to show you’ve applied for a commercial loan. 

 

From 6th April 2024 settlements and estates with income of all types up to £500 no longer pay income tax. Where there’s more income tax is still due on the full amount. This applies for every tax year of administration, but unused amounts won’t normally roll over to following years. It includes all types of income after ISA income, which remains exempt for up to 3 years following death.