Inheritance tax and capital gains tax for individuals and trusts


Sound inheritance tax advice is vital to ensure that no more tax than necessary is paid from a deceased person’s estate.

Currently inheritance tax is only payable on estates above £325,000 (the nil rate band) and is charged at a rate of 40%. There is usually no tax at all, whatever the value of the estate, on property going to a widow or widower, or to a EU-registered charity.

This is known as exempt property and is deducted from the value of an estate before any inheritance tax calculations are made.

Property can be given as gifts to husbands, wives, civil partners and charities to reduce the value of an estate. With careful, timely planning making such gifts can reduce an estate to below the nil-rate thresholds.

If the deceased had a life interest in any trust or had made gifts of capital during the seven years prior to his or her death, the value of these will usually be added to the rest of the estate, thus increasing the inheritance tax payable.

In the case of an estate of a widow or widower who has not remarried and whose death occurs after 9th October 2007, it may be possible to claim a further allowance against inheritance tax, known as the ‘transferable nil-rate band’. Any part of the nil-rate band unused on the first death can be claimed and added to the nil-rate band available to the survivor, with an additional increase to reflect any change in the nil-rate band between the first death and the second death. We can advise you in further detail about this.

Inheritance tax has to be paid before we can obtain the grant of representation from the Probate Registry. Because the estate is ‘frozen’ at the date of death, raising funds to pay inheritance tax before the grant is obtained may mean borrowing money. Banks, building societies, and some other institutions are usually willing to advance funds that they are holding in order to enable payment of inheritance tax.

Inheritance tax is generally due to be paid six months after the end of the month in which the death occurs. There are special arrangements for payment of tax in respect of land (including a house or flat) and shares in a private company, where tax can usually be paid in instalments over 10 years. However, any Inheritance tax paid after the end of six months from the date of death will attract interest at the current HM Revenue & Customs rate.

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