Personal loan to pay inheritance tax?

jrdutton

Hi all. I’m stumped and hoping for some sagely advice.

We have an inheritance tax bill of £280k due at the end of the month.

I, wrongly, assumed that I’d be able to cover this with the estate. However, we have plenty tied up in funds, that are frozen until probate is complete.

As a family we can produce £120k, but £160k is still outstanding.

So, I cannot pay the IHT bill until funds are released. Funds aren’t released until probate is completed. Probate cannot be completed until the bill is paid. It’s a terribly unfair circular situation.

I am under the impression that direct payment, using IHT423 does not work with fund accounts.

I was wondering if there are any recommendations of low cost loans, for a short period of time (3 months) to cover this quandary. Or any other suggestions?

Hoping for some help,

James

Keep_pedalling

What sort of fund accounts are we talking about? You should be able to use direct payment with UK mainstream fund accounts.

The alternative is to pay by instalments.

Marcon

Keep_pedalling said:

The alternative is to pay by instalments.

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

handful

jrdutton said:

Hi all. I’m stumped and hoping for some sagely advice.

We have an inheritance tax bill of £280k due at the end of the month.

I, wrongly, assumed that I’d be able to cover this with the estate. However, we have plenty tied up in funds, that are frozen until probate is complete.

As a family we can produce £120k, but £160k is still outstanding.

So, I cannot pay the IHT bill until funds are released. Funds aren’t released until probate is completed. Probate cannot be completed until the bill is paid. It’s a terribly unfair circular situation.

I am under the impression that direct payment, using IHT423 does not work with fund accounts.

I was wondering if there are any recommendations of low cost loans, for a short period of time (3 months) to cover this quandary. Or any other suggestions?

Hoping for some help,

James

Are you administering the estate yourself? I'm currently in a similar position but went the professional route in the end. The funds (a S&S ISA and Collective Investment account) were held with Quilters who had previously advised that the funds would be frozen until probate had been granted. When they were approached by the specialist accountant that we instructed they were happy (or at least prepared) to and have just recently paid the IHT bill of around £128k.

MDMD

Note you may be able to get tax relief for the loan subject to meeting the conditions 

https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim10350

Daniel54

We have done a lot of the legwork ourselves, mainly me, but are using solicitors for more complex issues such as this

Same deadline of end this month.

Investments are in Isa and a general investment account, ranging from individual shares at one end  to a decent amount of cash at the other

I signed the IHT 423 form earlier this week and it has now been submitted by the solicitors  to the investment managers, who advised /confirmed their procedures in advance.They will sell the securities required to pay the substantial sum (over £300k) direct to HMRC

We looked into liquidating the balance of the portfolio at the same time.But this required a separate set of forms and procedures.As we can de-risk the portfolio by selling down in priority  any of the more more volatile assets to pay HMRC,we will wait until probate to liquidate what is left.

I expect each asset manager might have their own rules but I would check again that the funds are"frozen" and not capable of being realised to the amount required for IHT423

If you still have no joy ,then using a suitably qualified solicitor or accountant may unlock the problem you have and would be likely money well spent

PS Edited to add that you can obtain probate without paying the IHT due,but the issue for you might be that Interest of 6.5% pa starts accruing 6 months after date of death.So in the situation I am describing, we are paying a provisional calculated amount in advance of probate to avoid interest, and at the same time submitting IHT400 evidencing the provisional amount being paid to HMRC.

jrdutton

Daniel54 said:

We have done a lot of the legwork ourselves, mainly me, but are using solicitors for more complex issues such as this

Same deadline of end this month.

Investments are in Isa and a general investment account, ranging from individual shares at one end  to a decent amount of cash at the other

I signed the IHT 423 form earlier this week and it has now been submitted by the solicitors  to the investment managers, who advised /confirmed their procedures in advance.They will sell the securities required to pay the substantial sum (over £300k) direct to HMRC

We looked into liquidating the balance of the portfolio at the same time.But this required a separate set of forms and procedures.As we can de-risk the portfolio by selling down in priority  any of the more more volatile assets to pay HMRC,we will wait until probate to liquidate what is left.

I expect each asset manager might have their own rules but I would check again that the funds are"frozen" and not capable of being realised to the amount required for IHT423

If you still have no joy ,then using a suitably qualified solicitor or accountant may unlock the problem you have and would be likely money well spent

PS Edited to add that you can obtain probate without paying the IHT due,but the issue for you might be that Interest of 6.5% pa starts accruing 6 months after date of death.So in the situation I am describing, we are paying a provisional calculated amount in advance of probate to avoid interest, and at the same time submitting IHT400 evidencing the provisional amount being paid to HMRC.

The fund managers (Fisher Investments) are adamant that they can do nothing. I’ve now taken out two personal loans but am still coming up short by £110k. It’s maddening!

Would you be able to point me in the direction of a solicitor you used? Thank you