Paying IHT in instalments and getting Probate

JonVUK

My gran died a couple of weeks ago and my uncle is executor. He is desperate to get all the IHT paid immediately before the cost of probate rises in April, which is putting huge financial pressure on the rest of the family to find that much money in a couple of weeks.


HMRC site just says 'pay any tax due' before applying for probate.

About 60% of the estate is the house, so the question (I've scoured the internet for hours with no apparent answer)
If you elect to pay the IHT on the house in yearly instalments can you be granted probate now or will probate only be granted once the instalment payments have completed?


The way i've understood it is if the house is on 10 yearly instalments then that tax is not due now and so we only need to pay the IHT on remaining 40% of the estate to get probate, is that right?


Thanks in advance,
Jon

Tom99

You will be granted probate now once you have paid the IHT on the part you are not allowed to pay by installments. Then the 1st of the 10 installments is due 6mths after death. You pay interest on anything paid after that 1st 6mth period.
The forms will calculate for you what you owe now and what is due at each installment.

JonVUK

Thanks Tom for confirming this.

Am I also correct in understanding that you can pay off the instalment portion early (to avoid the interest), ie when the house sells or savings accounts mature?

Tom99

JonVUK wrote: »

Thanks Tom for confirming this.

Am I also correct in understanding that you can pay off the instalment portion early (to avoid the interest), ie when the house sells or savings accounts mature?

If you sell the house you must pay all of the outstanding amount you cannot continue with the installments and yes you can pay any amount you like earlier if you want to. Its left up to you to calculate the interest due but there is an online calculator to help you. If you overpay with the last installment you will get a refund.

http://www.hmrc.gov.uk/tools/inheritancetax/interest-rate-calculator.htm

Keep_pedalling

Are you sure he has calculated the IHT correctly and taken account of GFs allowances and transferable allowances if he was a widower?

With the house taking up just 60% of the whole estate there will be sufficient other assets to pay any IHT due regardless of how large the estate is.

Tom99

Keep_pedalling wrote: »

Are you sure he has calculated the IHT correctly and taken account of GFs allowances and transferable allowances if he was a widower?

With the house taking up just 60% of the whole estate there will be sufficient other assets to pay any IHT due regardless of how large the estate is.

But until you have probate you may not be able to get at the remaining 40% hence the need to defer as much IHT as possible prior to probate being granted.

JonVUK

Hi Keep pedalling,


Yes all allowances have been accounted for, included transfered nil-rate from partner who died 3yrs ago.


The problem I have is trying to explain this to a relative. He wants to pay the full £120,000 IHT right now, before probate goes up to £4000 in April. He's insisting everyone in the family has to close savings accounts (paying big early withdrawal penalty charges) to raise the money.


I know a lot of my grandparents savings are tied up in Stocks & Shares, i've no idea why there isn't spare cash to pay the bill. My uncle probably thinks the acounts are frozen and can't be touched (that's something else to explain!)

Keep_pedalling

JonVUK wrote: »

Hi Keep pedalling,


Yes all allowances have been accounted for, included transfered nil-rate from partner who died 3yrs ago.


The problem I have is trying to explain this to an elderly uncle, who doesn't even have the internet at home, and relies on books at the library for info. He is fixated on paying the full £120,000 IHT right now, before probate goes up to £4000 in April. He's insisting everyone in the family has to close savings accounts (paying big early withdrawal penalty charges) to raise the money.


I know a lot of my grandparents savings are tied up in Stocks & Shares, i've no idea why there isn't spare cash to pay the bill. My uncle probably thinks the acounts are frozen and can't be touched (that's something else to explain!)


I'm seeing him at the funeral tomorrow, but that's probably not the right time to start explaining how to save us all some money....

Probably best to arrange a meeting with him after the funeral. It will be possible to arrange for banks / building societies to pay HMRC directly from the deceased persons accounts,. I would offer him you assistance in arranging this.

Savvy_Sue

Keep_pedalling wrote: »

Probably best to arrange a meeting with him after the funeral. It will be possible to arrange for banks / building societies to pay HMRC directly from the deceased persons accounts,. I would offer him you assistance in arranging this.

particularly important as well to make sure that the library books he is relying on are up to date, there have been several important changes in recent years and I don't know whether libraries are able to keep absolutely on top of this.

I'd definitely be up for offering help, I'd even go so far as BUYING a book on wills and probate (we used the Which guide first time around and found it very good). Also explaining that it may not be possible for everyone to raise their 'share', we don't all have savings accounts on that scale we can raid!