Inheritance tax

[Gcdryj344]

My dear Mum died recently. She owns a house worth £800,000. She has left her entire estate to be split 3 ways between myself, my sister and my son. She was divorced and had no debts.

How much of the 800k will be left after inheritance tax?

How do we pay inheritance tax when none of us have any savings?

I thought any amount over £325,000 was taxed at 40%. So the tax would be taken out before you get it, therefore you don't need to find the money. However I may be misinformed.

You need to speak to lawyer before anything , they will be able to advise on what your next steps are .

The rules are different when you pass on your home :- https://www.gov.uk/inheritance-tax

Also you won't be paying the inheritance tax , it will come out of the assets /house sale . Once you have filled the paperwork the HMRC will contact you . Estate lawyer , their fees will also come out of the estate

It depends on how the will was written. If the house was specifically left to you and the other beneficiaries in the will, then you can also claim Nil Rate Band of £175k.

If 'assets' were left (i.e. the house not specified separately) then you can't.

So at best 40% on £325k+175K ie £800-£500=£300k*40% = ££120k tax - which is paid after sale.

At worse - £800k-£325k = £190k tax.

Disregarding sales and solicitor fees etc.

You will need to obtain probate too.

If there's also bank balances, shares etc. these go towards the total estate value.

£325 personal IHT allowance. Increases to £500k if leaving property. So IHT payable at 40% on £300k = £120k IHT

If she was a widow she would have inherited her husband's IHT allowance so IHT would have been payable over £1m.

You can get short-term loans specifically for IHT that you pay off when you get the inheritance money.

www.moneyhelper.org.uk/en/family-and-care/death-and-bereavement/a-guide-to-inheritance-tax

This might be helpful, OP. It talks about different ways of paying.

If you are required to pay don't you have 6 months from the day of death before you have to pay or the debt will accrue interest. HMRC will loan you the money at a rate of interest and of course a bank which may offer a lower rate.
The devil is in the details and remember that family members can get giddy when they believe £££ may be in the offing.

If 'assets' were left (i.e. the house not specified separately) then you can't.

This is incorrect.

OP, based on what you’ve said there is likely to be tax to pay. It will be paid from the estate but this can be tricky where there’s not enough cash in the estate to cover it- essentially you need to have paid the first instalment (10%) of the tax before you can get probate, sell the house and pay the rest of the tax.

I’d suggest instructing a solicitor to handle it.

Has your dad also died/ was he married to your mum when he died? If yes to both I believe the IHT allowance for both is passed on (so 650k would be tax free instead of 325k)

And sorry for your loss.

OP says her mum was divorced.

Oops should have read more thoroughly!

If leaving a property to children the IHT threshold increases to £500k. If your Dad predeceased her and didn't use his allowance on his estate (if everything went to your mum for example as assets joint) then you can use his allowance too so if estate £800k all in property you may not have any IHT to pay. Check with a solicitor.

Whoops sorry I just saw she was divorced. So I think it will be 40% of everything over £500k. It can be paid when the property is sold but check with a solicitor.

I understand that probate isn't granted until IHT has been paid so you have to take out a loan to pay it and hope the property sells quickly.

Please get a lawyer and make sure you get proper advice on this

Really? That sounds outrageous

Sorry to hear about the loss of your Mom.

I have recently had to complete such forms.

If you're in England and Wales, have a look at IHT400 form. This gives guidance, especially pages 12 & 13 about the IHT.

I enquired with a probate specialist and was quoted 10k to do IHT and probate but I had done visits to bank etc with death cert so decided to do it myself and estate was quite simple.

No IHT was due for us but had to complete forms to transfer over late mothers allowances.

Hope all goes well with it all.

its not quite right. You have to pay the first instalment (10% of the tax). Obviously that can still be a lot of money- it’s a ridiculous system.

I’ve just gone through this and was similarly outraged that I would have to arrange a loan or pay interest on instalments. As it happened my solicitor simply filled in a form requesting the funds from my late aunt’s nationwide and Barclays accounts be used to pay the £75k IHT. I am a legal exec but in a completely different field so dabbled with dealing with this myself but decided I did not have the capacity so instructed an acquaintance at another firm. Best decision I made. All has gone through smoothly and everything I researched indicated I would have to stump up the IHT so my solicitor has more than earn this fee.

We’re going through it now. You pay 40% of the inheritance over £500k if the property is being left to the deceased’s children. You have to have everything worked out and the forms sent off to apply for probate within six months of the death, and also pay the first instalment of the amount (you can pay 10% of the IHT each year for ten years if the property is not sold, but IHT on other assets must be paid with the first instalment, so the first instalment might surprise you by being higher than you expect). If you don’t have the funds to pay the IHT when it’s due you have to take out a loan, which must be at a reasonable interest rate.

We have a strange situation going on, in that probate was granted within three months of the forms going in, but then a month later we have been informed that the district valuer will be contacting us to do another valuation. Apparently this is rare, and probably because the property is unusual (small holding), but they can take months to do it. It’s throwing a bit of a spanner into our plans to renovate.

I did probate recently for my mother’s estate. The inheritance tax helpline is hugely helpful (when you can get through…). The gov website less so. What you need to do is go through all of the forms methodically. It is quite straightforward (even with my mother’s myriad bank accounts). You can take off the cost of the funeral, the headstone and the wake, which will reduce the IHT payable. My cousin paid a solicitor to do probate for her Dad and he charged a percentage of the estate, which was huge (she paid him £43K). I would do it yourself if you can.

Gosh that is a lot. Our solicitor charged under £2k (probably regrets it now as it’s all kicked off again now the district valuer is involved).

inheritance. My husband has passed. I have four daughters. Three have children. One daughter has no children. If she dies will her husband inherit her share?