Mastering the Paperwork: Filling in Inheritance Tax Forms

When dealing with the estate of someone who has died, you need to fill in some forms for HM Revenue & Customs. Where Inheritance Tax is payable, you may need to complete several schedules. We take a look at filling in Inheritance Tax Forms, including what forms are needed and who can complete them.

After a death, the estate’s executor or administrator needs to establish whether Inheritance Tax is payable by valuing the net estate. They obtain a value as at the date of death. This is for all of the deceased’s accounts and investments. Additionally, other assets such as property, cars, furniture and jewellery are included.

The amount of any liabilities, is deducted from the total asset value to give the amount of the net estate. Liabilities include such things as outstanding tax, credit card debt or a mortgage,

When is Inheritance Tax payable?

The good news is that the first £325,000 of an estate is exempt from Inheritance Tax. This means you won’t owe any tax on this portion of the assets. Even better, any unused allowance from a deceased spouse or civil partner can be transferred to the surviving partner. This combined allowance could potentially total £650,000 that is exempt from Inheritance Tax.

There’s another potential tax break available if the deceased leaves property to their direct descendants, such as children or grandchildren. In this case, an additional £175,000 allowance applies to both the deceased and any predeceased spouse or civil partner.

Inheritance Tax itself is charged at a rate of 40%. However, there is a reduced rate of 36% if at least 10% of the estate is left to charity. It’s important to note that Inheritance Tax also applies to gifts of cash or valuables exceeding £3,000 per year given by the deceased in the seven years before their death. The tax on these gifts is calculated on a sliding scale depending on how long ago they were made.

There are some additional minor exemptions for specific gifts.  Consulting a professional advisor is recommended to ensure you maximize all potential tax allowances.

If Inheritance Tax is due, your next step is to contact HM Revenue & Customs (HMRC) for an Inheritance Tax reference number. Do this at least three weeks before you plan to make a payment. The deadline to pay Inheritance Tax is the end of the sixth month following the deceased’s death. In some cases, you may be able to pay in instalments, but the first instalment must still be paid by this deadline.

Filling in Inheritance Tax forms

Inheritance Tax forms can be complex and you can choose to ask a probate solicitor to deal with these on your behalf.

There is a main summary form to fill in, known as IHT400. In addition, you will usually need to fill in several other forms, depending on the assets held by the deceased. These include:

IHT401, if the deceased was domiciled outside of the UK

IHT402, to claim Inheritance Tax allowance that was not used by the deceased’s spouse’s estate

IHT403, details of gifts and other transfers of value

IHT404, jointly owned assets

IHT405, houses, land, buildings and interests in land

IHT406, bank and building society accounts

IHT407, household and personal goods

IHT408, household and personal goods donated to charity

IHT409, pensions

IHT410, life assurance and annuities

IHT411, listed stocks and shares

IHT412, unlisted stocks and shares and control holdings

IHT413, business and partnership interests and assets

IHT414, agricultural relief

IHT415, interest in another estate

IHT416, debts due to the estate

IHT417, foreign assets

IHT418, assets held in trust

IHT419, debts owed by the deceased

IHT420, National Heritage assets, conditional exemption and maintenance funds

IHT421, probate summary

IHT423, direct payment for Inheritance Tax

IHT430, reduced rate of Inheritance Tax

IHT216, claim to transfer unused Inheritance Tax nil rate bank

IHT435, claim the nil rate residence band

This list is not exclusive. Most important to remember is the forms must be completed accurately. Unfortunately, mistakes in the forms will delay the issue of the grant.

Paying Inheritance Tax

Once you’ve established the amount of Inheritance Tax owed, it’s time to make the payment to HM Revenue & Customs (HMRC). There’s a convenient option available in some situations: If the deceased had sufficient funds in a bank, building society, or National Savings and Investments account, you can request the institution to pay the Inheritance Tax directly. This simplifies the process for you. Initiate this by completing form IHT423 and send it to the asset holder, not directly to HMRC.

However, there may be situations where the estate’s assets aren’t readily available as cash. For example, if a significant portion of the value is tied up in property that needs to be sold before distribution. In these circumstances, payment by instalments may be allowed. While this can provide some flexibility, it’s important to note that interest will accrue on the outstanding balance until the Inheritance Tax is paid in full.

Applying for a Grant of Probate or Grant of Letters of Administration

Once you’ve submitted the payment and relevant forms to HM Revenue & Customs, wait two to three weeks before proceeding. After this waiting period, you can then actively apply to the Probate Registry for a Grant of Probate or a Grant of Letters of Administration.

The type of application form you need depends on whether the deceased left a valid Will. If they did, fill out form PA1P. However, if there’s no valid Will, form PA1A is the appropriate choice.

Along with the completed application form, include the required fee (currently £273). If there’s an original Will, submit that as well, along with any codicils (supplements to the Will).

You can request extra copies of the grant for £1.50 each. While you generally don’t need one copy for each asset holder (they typically register and return them), having a few spares can be helpful for distribution purposes.

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