Inheritance tax is supposed to be paid by the end of the sixth month of a person’s death. For instance, in case someone died on 15th January 2020, any inheritance tax due on the estate will have to be paid by 31st July 2020. Usually, the beneficiaries may need to sell some of the assets to realize the cash with which to pay the inheritance tax bill. Often the deceased estate will include non-cash assets such as shares, property and other similar items.
What are your instalment options?
In case the executors wish to pay the inheritance tax in instalments, they need to indicate this on the IHT400 form. For certain assets that take time to sell, inheritance tax can be paid in equal annual instalments spread over 10 years. However, the taxes must be paid in full if the assets have already been sold.
Which assets qualify for payment in instalments?
The following assets qualify for payment in instalments:
- shares or securities (where the deceased had control of more than 50% of the company);
- unlisted shares and securities worth more than £20,000 (representing either 10% of the nominal value of the shares or 10% of the value of the ordinary share capital of the company);
- land, for instance, a house that a beneficiary is living in or wishes to rent out
Can payments be made in instalments for other assets?
Yes, payments can be made in instalments:
- where there is inheritance tax still to pay on gifts in the form of shares, securities or buildings or all or part of business
- where at least 20% of the inheritance tax owed by the estate is on assets qualifying for payment in instalments and paying them in a single lump sum will lead to financial difficulties
- if the deceased estate includes a business that is run for profit and IHT is due, it must be paid on the net value of the business, but not on the business assets.
What are the payment dates?
The first instalment payment date is the normal IHT due date (the end of the sixth month after the month in which the deceased died). Afterwards, the subsequent instalments will be due on this date each year for the next nine years.
How much interest is payable in different instalments?
Interest is payable on the second and subsequent instalments on both the full balance of the outstanding tax where the instalment route is taken. Additionally, interest is also payable on the instalment from the due date to the date of payment where an instalment is paid late (including the first instalment.
When can you clear the bill?
You can clear the outstanding bill and pay any associated interest at any time. In case of assets are sold at a later date, clearing the outstanding debt may be the
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