Inheritance Tax (IHT) can be payable by an estate when someone passes away and their estate (including all property, possessions, and financial assets) exceeds the relevant nil rate bands.
When faced with this tax liability, beneficiaries and executors often wonder if there is a way to pay it in instalments rather than in a lump sum.
While Inheritance Tax is typically payable as a lump sum and you must pay the tax in full when the deceased’s assets have been sold, where assets are not easily converted to cash specific circumstances can apply and the IHT may be paid in instalments. Examples of such situations include:
- Property: if you decide to keep the property to live in.
- Listed shares and securities: if the shares or securities allowed the deceased to control more than 50% of a company.
- Unlisted shares or securities: that are worth more than £20,000.00, and
- The shares represent 10% of value of the shares in the company at the price they were first sold or
- The shares represent 10% of the value of the ordinary shares in a company, at the price they were first sold.
- Businesses: based on the net value of the business but not its assets
It is also possible to pay by instalment if paying in full would cause financial hardship.
The executors may even consider taking a loan specifically for the payment of the IHT should the specific criteria not be met.
Please note that where the option to pay by instalment is taken interest is applied to the amounts deferred and there is always the option to settle the balance in full at any point to stop the interest charges.
It is essential to remember that these instalment options involve specific conditions and must be agreed with HMRC. Beneficiaries or executors should consult with a qualified tax advisor to ensure compliance with current tax laws and to explore the available options for paying Inheritance Tax.
Our team of tax experts are here to help you navigate the sometimes-complicated world of Inheritance Tax. Call us today on 01900 603623 and chat to a member of our team to ensure you’re getting the most up-to-date help and advice.