Basic questions re IHT thresholds and when the tax is due

pinkteapot

My mum mentioned in passing that inheritance tax has to be paid before probate can be granted. But I thought probate has to be granted before a house can be sold (?). So, my question is, how are you meant to pay HMRC the inheritance tax bill before you've got the proceeds from the house sale? 

Both my mum and Mr Teapot's parents have most of their wealth tied up in their houses. I'm now having kittens about a potentially significant bill we have no way of paying (coming at what will be a really awful time ). I've read that there are companies offering loans for this situation, that are secured against the estate. Is this what people do? 

For the boomer generation owning a house but not significant amounts of cash savings, this is surely an issue for lots of people?

Separately, my mum was married but she and my dad divorced several years ago now. I assume she's back to the single-person allowance of £325k?

Any reassurance would be much appreciated. Though I'm hoping this won't be an issue for a long time to come. (And of course it assumes that the houses don't end up going towards any care bills - which they could). 

getmore4less

There is also the residential allowance  if she meets the criteria.

any tax dues can be delayed(paid in instalments)  with interest.

https://www.gov.uk/paying-inheritance-tax/yearly-instalments

Keep_pedalling

If the only major asset they own is their houses are you sure IHT will even be an issue? You have not taken into account their residential NRBs which pushes your mother’s allowances up to £500k. Mrs Teapot’s parents can leave double that tax free.

pinkteapot

Ah, I'll take a look! I didn't realise there were any other allowances beyond the 'main' one. They're all in the south-east where house prices have been crazy the last few years. Very roughly the houses are probably £350k for mum and £600-700k for the parents-in-law. They have savings that would take them over the thresholds if it was just the £325k/£650k, but sounds like there may not be an issue. I'll have a look to put my mind at rest.  

As I said, it could end up going towards care anyway, or the IHT rules could have changed by the time it's an issue (hopefully several years off). I just wanted to get a better understanding than I had (which was pretty much no understanding) so I'm not trying to learn the basics while dealing with grief, if it does become an issue.

shiraz99

If IHT is due there are options available if al the funds are tied up in the property. One option is to pay the IHT liability in instalments, HMRC will allow, in certain circumstances, a 10 year period to pay off the liability, although this will accrue interest. If you can't afford even the initial instalments then it's possible to gain a grant of credit from HMRC but this will be be at a last resort after all avenues, such as bank loans, have been explored.

Keep_pedalling

shiraz99 said:

If IHT is due there are options available if al the funds are tied up in the property. One option is to pay the IHT liability in instalments, HMRC will allow, in certain circumstances, a 10 year period to pay off the liability, although this will accrue interest. If you can't afford even the initial instalments then it's possible to gain a grant of credit from HMRC but this will be be at a last resort after all avenues, such as bank loans, have been explored.

Anyone that asset rich and cash poor, is going to have a lot more problems while alive the their executor will have after they have gone.