Inheritance and INCOME tax

Meggy

Am I right in thinking any money you receive as a result of parental death is subject to income tax? Please note I am pretty clear on the subject of inheritance tax and how it affects me (or not). This is specifically about income tax. I have a brother who is already just inside the 40% bracket. I am not a tax payer at the moment. We both stand to inheritance a good sum which will not make us subject to IHT but I am concerned about the income tax brackets. Can anything be done about it? Why pay the tax man 40% of what your father left you?

Keep_pedalling

You are wrong on 2 accounts, you don't pay IHT, the estate does, and no it is not income so you don't pay income tax on it.

You say you are pretty clear on IHT, but it does not sound that way. What, if any, action have your parents taken to reduce IHT?

Meggy

Hi. Yes, aware it is the estate not me personally. Before my mother died via a solicitor they put their property into a trust. The value now is under the current IHT levels and even when we add other assets I do not believe the estate will reach the IHT levels, especially as I think my father effectively gets any portion of mother's IHT allowance unused. That is why I was concerned about the cash left to the children and whether it is income for us. Thanks for confirming it was not be counted as income. Would it have to be declared to any authority at all? Because of the trust I think we will probably have to go through probate. Am I right in thinking any payments due (if any) are done during that process? Basically we are trying to avoid losing any chunk of our inheritance if it is indeed avoidable. I've tried reading the .gov pages but still end up with these questions.

getmore4less

What sort of trust?

xylophone

https://www.gov.uk/trusts-taxes/trusts-and-inheritance-tax

TW1234

You do not pay income tax on receipt of capital from a bequest. You will have to pay income tax on any interest that arises from it thereafter, in the usual way.
IHT is paid from the estate before the payment of bequests. If the estate is not liable for IHT due to its value being below the available thresholds, then fine. If not, research means of minimising the IHT due.

troubleinparadise

If the property is still owned by your father upon his death, then the executor/s will have to obtain probate when it comes to executing his estate.

Any cash bequests to "the children" would not cause the beneficiaries to have to pay income tax (although I'm not clear quite who you are referring to).

It sounds as though whilst there have been some steps taken with regard to tax planning, you might well benefit from doing a bit more research on how it all works.

Your posts indicate that contrary to your opinion you don't really understand inheritance tax, nor the process of executing a will.

In true MSE style, Google would be a good starting point to get going.