Filling in Inheritance Tax forms

Mastering the Paperwork: Filling in Inheritance Tax Forms

When dealing with the estate of someone who has died, you need to fill in some forms for HM Revenue & Customs. Where Inheritance Tax is payable, you may need to complete several schedules. We take a look at filling in Inheritance Tax Forms, including what forms are needed and who can complete them.

After a death, the estate’s executor or administrator needs to establish whether Inheritance Tax is payable by valuing the net estate. They obtain a value as at the date of death. This is for all of the deceased’s accounts and investments. Additionally, other assets such as property, cars, furniture and jewellery are included.

The amount of any liabilities, is deducted from the total asset value to give the amount of the net estate. Liabilities include such things as outstanding tax, credit card debt or a mortgage,

When is Inheritance Tax payable?

No Inheritance Tax is payable on the first £325,000 of an estate. Neither is it payable on any balance over that sum left to the deceased’s spouse, civil partner or to charity. If the deceased’s spouse or civil partner died before them and their £325,000 allowance was not used, any unused portion can be transferred. Thus meaning a total potential allowance of £650,000.

Furthermore there is a another potential allowance if a property is left to the deceased’s direct descendants, ie. children or grandchildren. This is £175,000 for the deceased and also for any spouse or civil partner who has already died.

Inheritance Tax is payable at a rate of 40%, unless the deceased left 10% or more of their estate to charity, in which case it is 36%. Additionally, Inheritance Tax is payable on gifts of cash or valuable items of £3,000 or more per year. These are those given by the deceased in the seven years prior to their death. Tax on gifts in this period is payable on a sliding scale, depending on how long ago they were made. There are some additional small exemptions for certain gifts. Consider taking professional advice to ensure you take advantage of any potential allowances.

If Inheritance Tax is payable, the next step is to contact HM Revenue & Customs and ask them for an Inheritance Tax reference number. Do this three weeks before you intend making a payment.

Inheritance Tax is paid by the end of the sixth month after the deceased died. There is scope for payment to be made in instalments, in which case the first instalment should be made by this deadline.

Filling in Inheritance Tax forms

Inheritance Tax forms can be complex and you can choose to ask a probate solicitor to deal with these on your behalf.

There is a main summary form to fill in, known as IHT400. In addition, you will usually need to fill in several other forms, depending on the assets held by the deceased. These include:

IHT401, if the deceased was domiciled outside of the UK

IHT402, to claim Inheritance Tax allowance that was not used by the deceased’s spouse’s estate

IHT403, details of gifts and other transfers of value

IHT404, jointly owned assets

IHT405, houses, land, buildings and interests in land

IHT406, bank and building society accounts

IHT407, household and personal goods

IHT408, household and personal goods donated to charity

IHT409, pensions

IHT410, life assurance and annuities

IHT411, listed stocks and shares

IHT412, unlisted stocks and shares and control holdings

IHT413, business and partnership interests and assets

IHT414, agricultural relief

IHT415, interest in another estate

IHT416, debts due to the estate

IHT417, foreign assets

IHT418, assets held in trust

IHT419, debts owed by the deceased

IHT420, National Heritage assets, conditional exemption and maintenance funds

IHT421, probate summary

IHT423, direct payment for Inheritance Tax

IHT430, reduced rate of Inheritance Tax

IHT216, claim to transfer unused Inheritance Tax nil rate bank

IHT435, claim the nil rate residence band

This list is not exclusive. Most important to remember is the forms must be completed accurately. Unfortunately, mistakes in the forms will delay the issue of the grant.

Paying Inheritance Tax

Once the amount of inheritance tax payable is established, you then pay this to HM Revenue & Customs. If the deceased held enough money in a bank, building society or National Savings and Investments account, you ask the asset holder to pay the Inheritance Tax directly. You fill in form IHT423 and send it to the asset holder, not to HMRC.

Payment by instalments is allowed in certain circumstances. For example, money is tied up in the deceased’s property which needs to be sold. In this case, interest is payable on the outstanding amount.

Applying for a Grant of Probate or Grant of Letters of Administration

Two to three weeks after payment and relevant forms are sent to HM Revenue & Customs, an application can be sent to the Probate Registry. This is for a Grant of Probate or a Grant of Letters of Administration.

If the deceased left a Will, the probate application form is PA1P. Alternatively, if the deceased did not leave a valid Will, you need to fill in form PA1A.

Send the fee, currently £273, together with the application form, original Will, if there is one, and any codicils. Extra copies of the grant are available for £1.50 each. You may purchase several of these to send out to the asset holders. Generally they register and return them, so you do not need one each, but having a few is helpful.

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