Paying Inheritance Tax

Newsletter issue - September 2015

Various rules exist for determining the time for payment of inheritance tax (IHT). In certain circumstances it will be possible to pay in installments, and it is even possible to settle a liability by transferring ownership of assets to the Crown (for example, a valuable painting may be donated to a national museum in lieu of an inheritance tax bill).

Unless it can be paid in installments, IHT is generally due for payment as follows:

IHT is often due to be paid before the cash and assets left in a will are released to the beneficiaries. This means that the beneficiaries have to find the money to pay the tax elsewhere. The most obvious way to solve this problem is to take out a loan to pay the tax owed. The loan can then be paid off after cash from the estate is received or, in the case of assets, the assets are sold to raise the funds needed.

It may be worth considering a life insurance policy that will pay out on death and so cover any IHT arising on an estate. Remember, though, that HMRC may consider a life insurance policy to form part of an estate, so the plan should be set up under a trust. A fringe benefit of this is that all proceeds of the policy are paid free of tax.

Don't miss out

Our monthly newsletter is a great way to stay in touch with our work and everything that's going on in the accountancy world. Sign up now for our latest news and keep one step ahead in your business.

Sign up for our newsletter