Where an estate is not an “excepted estate” (this is one which is free of Inheritance Tax and within certain tolerances as to size), the Personal Representative (PR) must deliver an account to HMRC within twelve months of the end of the month in which the deceased died, or within three months of taking up his appointment as PR if later.
Where the PR reports a taxable estate after the six month period beginning from the end of the month in which the deceased died, interest is added to any IHT due, beginning on the first day after the six month period has elapsed.
The time to pay the tax is determined by the nature of the assets in the estate.
For most assets, the tax is due to be paid in full six months after the end of the month in which an individual died. For example, if a deceased whose estate is liable to IHT dies on 16 June the tax is due to be paid six months from 30 June i.e. 31 December. These assets are referred to as assets with the non-instalment option.
Where an estate includes any of the following types of assets, the IHT attributable to these assets may be paid in 10 equal yearly instalments. The assets are referred to as assets with the instalment option and are:
The first instalment of IHT arising on the above types of asset is due at the end of the six month period. The nine remaining instalments are then due at yearly intervals on that date. There is an interest charge on this installment route.
In practice, it is important to apply for Grant of Probate as quickly as possible, as one of the requirements is to have paid any tax liability due. By obtaining the Grant before the tax is due, this condition is easily met, and the estate may be collected in so as to fund the tax payment.
If the 6 month period is missed, then the position is more complicated as the tax will need to be paid so that HMRC will confirm that the liabilities are up to date. There are ways to resolve this, but if you are an Executor in this position then we would advise seeking professional advice at this stage.
If you found this article helpful we would recommend reading, ‘Probate: What is a Caveat?’Talk to our legal team
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