Inheritance tax (IHT) is chargeable on estates worth £325,000 or higher. The current rate of IHT is 40 percent but there are ways to mitigate this charge or potentially lower the amount paid.
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So long as IHT is due, the people involved must pay the bill by the end of the sixth month after the person died.
If the bill is not paid on time HMRC may charge interest which could make the cost even higher.
In order to pay the bill, a payment reference number will be needed.
This reference number will need to be applied for and it can be done online or through post.
Once the person (or family) involved has everything they need, they have a number of options available for paying the IHT bill.
One of the more straightforward options is to simply use the payee’s bank account.
The bill can be paid from an individual’s bank account or a joint account held with the deceased.
This can be done through online or telephone banking, CHAPS or Bacs or physically through a bank branch.
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It’s also possible to pay it directly from the deceased’s bank accounts (which includes NS&I accounts) or government stock.
It’s also possible to pay IHT on things that may take time to sell in equal instalments over 10 years.
To pay in instalments, an IHT400 form must be completed but interest will likely be added to the payments.
There are only certain assets that can be covered by instalments and they include houses, shares and securities, unlisted shares and securities, businesses run for profit or agricultural and property.
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However, there is one form of payment that has been affected by coronavirus.
The government recently announced that because of coronavirus, it is no longer possible to pay an IHT bill by cheque.
It has not been revealed how long this will last but the government states that payments by cheque do not receive receipts.
So, for people who want to check on if their cheques have been accepted, they will need to contact HMRC directly.
IHT is an unpopular tax as some consider it to be an unfair “death tax”.
The 40 percent rate can take a big chunk out of a family’s finances but additional interest problems can be mitigated.
The government states that it’s possible to make early IHT payments before the exact amount owed by the estate is known.
This is known as a “payment on account” and it can help avoid potential added income.
In some instances, it may be the case that overpayment has occurred. In these instances, HMRC will refund the excess payments after probate has been given.
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