Can I Pay Inheritance Tax In Instalments?

Can I Pay Inheritance Tax In Instalments?
Can I Pay Inheritance Tax In Instalments?

Welcome to DLS Solicitors, where we provide expert legal guidance tailored to your needs. Understanding Inheritance Tax (IHT) can often seem daunting, and we’re here to help clarify your options, particularly when it comes to managing payments. One common question we encounter concerns the ability to pay Inheritance Tax in instalments. In this comprehensive guide, we will explore this option in detail to assist you in planning your estate or handling the estate of a loved one.

Understanding Inheritance Tax

Inheritance Tax in the UK is a tax on the estate (the property, money, and possessions) of someone who’s passed away. There’s normally no Inheritance Tax to pay if either the value of your estate is below the £325,000 threshold or you leave everything above the threshold to your spouse, civil partner, a charity, or a community amateur sports club. The standard Inheritance Tax rate is 40% on anything above the threshold.

Eligibility for Paying Inheritance Tax in Instalments

The UK’s tax legislation does provide the option to pay Inheritance Tax in instalments over a period of time. This is particularly useful for estates that consist largely of illiquid assets, such as property or certain types of shares, which may not be easily sold or converted into cash.

It’s important to note that not all assets are eligible for instalment payment plans. Generally, the option is available for:

  • Land or buildings
  • Shares or securities that give the deceased control of a company
  • Unquoted shares held for more than two years before death
  • Certain types of business property that may qualify for relief

It is advisable to consult with a professional to understand the specific eligibility criteria for your situation.

How to Arrange Payment in Instalments

To pay Inheritance Tax in instalments, you’ll need to inform HM Revenue and Customs (HMRC) when submitting the IHT return. The option to pay in instalments is selected on the IHT400 form, and specific details regarding the assets for which you are seeking to pay by instalments should be provided.

Initial payments are due at the end of the sixth month after the person died. For example, if the person died in January, the first payment is due by the end of July. Interest will be charged on the unpaid balance but allows the estate to avoid immediate full payment.

Managing Instalment Payments

While paying in instalments can ease the financial burden on an estate, it’s critical to manage these payments effectively:

  • Keep track of payment deadlines to avoid unnecessary interest or penalties.
  • Consider paying off the balance sooner if the estate acquires sufficient liquidity, as this can save on interest costs.
  • Stay in communication with HMRC, especially if there are any changes in the estate’s financial situation or if you’re having difficulty meeting payment terms.

Conclusion

Paying Inheritance Tax in instalments can offer significant relief for estates that are asset-rich but cash-poor. However, navigating the complexities of IHT can be challenging without professional assistance. At DLS Solicitors, we specialise in providing clear, practical legal advice to help you make the best decisions for your estate or when handling an estate on behalf of a loved one.

If you have further questions about Inheritance Tax or any other estate planning concerns, please don’t hesitate to get in touch. Our team of experienced solicitors is here to support you every step of the way.

Avatar of DLS Solicitors by DLS Solicitors
12th July 2024
Avatar of DLS Solicitors
DLS Solicitors

Our team of professionals are based in Alderley Edge, Cheshire. We offer clear, specialist legal advice in all matters relating to Family Law, Wills, Trusts, Probate, Lasting Power of Attorney and Court of Protection.

All author posts
Related Posts
  • court of protection
    Applications In The Court Of Protection – FAQs

    DLS Solicitors provides answers to frequently asked questions regarding applications in the Court of Protection. Explore our concise guide to understand the process, requirements, and implications of seeking court intervention for vulnerable individuals.

  • The Implications Of Receiving A Decree Absolute In A Divorce Settlement
    The Implications Of Receiving A Decree Absolute In A Divorce Settlement

    Going through a divorce can be a challenging and emotionally draining process. Once the divorce proceedings are finalised, one of the final steps in the process is receiving a Decree Absolute. This document signals the legal end of your marriage and has significant implications for both parties involved. In this guide, we will explore the

  • solicitors
    How to Check if a Solicitor is Registered in the UK

    Ensure peace of mind by verifying the registration of a solicitor in the UK with DLS Solicitors' simple guide. Learn step-by-step how to confirm a solicitor's credentials and registration status, safeguarding your legal affairs. With our expert advice, navigating the process of checking solicitor registration becomes straightforward and reliable.

  • Navigating the Adoption Process: A Guide for Prospective Parents
    Navigating the Adoption Process: A Guide for Prospective Parents

    Adopting a child can be a rewarding and life-changing experience for both the child and the adoptive parents. However, the process of adoption can be complex and overwhelming, especially for those who are new to it. In this guide, we will provide an overview of the adoption process and offer some tips and advice for