Reflecting an accurate open market value
The personal representative (the person nominated to handle the affairs of the deceased person) arranges to pay any Inheritance Tax that is due. You usually nominate the personal representative in your will (you can nominate more than one), in which case they are known as the executor. If you die without leaving a will a court can nominate the personal representative, in which case they are known as the administrator.
If you have been nominated as someone’s personal representative you have to value all of the assets that the deceased person owned. This valuation must accurately reflect what the assets would reasonably fetch in the open market at the date of death.
In most cases, if an estate owes Inheritance Tax, you must usually pay it within six months after the death or interest will be charged. In some cases, you can pay by instalments once a year over ten years. The due date differs if Inheritance Tax is due on a trust.
Forms you need to complete
If the estate is unlikely to be subject to Inheritance Tax (an excepted estate)
If the estate is likely to be subject to Inheritance Tax
In this case you complete form IHT400 plus any relevant supplementary forms (these are indicated on the IHT400).
You also complete:
form IHT421 ëProbate summary’ if the deceased person lived in England, Wales or Northern Ireland
probate application form PA1 if the deceased lived in England or Wales
form C1 Inventory if the deceased lived in Scotland
(In Northern Ireland you only complete a probate application form at interview.)
The due date for Inheritance Tax is six months after the end of the month in which the deceased died. You must pay Inheritance Tax before you can get the grant of probate (or confirmation in Scotland).
If you’re paying Inheritance Tax by instalments, the first instalment is due six months after the death on the due date. The second instalment is due 12 months after that.
If someone gives you a gift and doesn’t survive for seven years after making it and the gift is liable to Inheritance Tax, the payment on the gift is also due six months after the death on the due date.
If the value of the assets being transferred exceeds the current Inheritance Tax threshold £325,000, Inheritance Tax can be due:
on transfers into a trust
on transfers out of a trust
every ten years after the original transfer into trust
The due date depends on when the assets
For transfers made between 6 April and 1 October, the due date is 30 April in the following year
For transfers made between 30 September one year and 6 April the next, the due date is six months after the end of the month in which the transfer was made
If you don’t pay Inheritance Tax in full by the due date, HM Revenue & Customs (HMRC) will charge interest on the amount outstanding, whatever your reason for not paying by the due date. It also charges interest if you pay by annual instalments.
If Inheritance Tax is due, you have 12 months from the end of the month in which the death occurred to send in a full Inheritance Tax account, this includes form IHT400, any supplementary pages and papers relating to probate (or confirmation in Scotland).
Unless you have a reasonable excuse for not delivering a full and accurate account within 12 months, you may have to pay a penalty in addition to any interest you owe.