Paying IHT

bikeman

Early days but thinking about how to settle IHT.

Deceased banked with Barclays but they've advised me that they dont provide estate advances to settle IHT. Amazed that such a big bank wouldn't.

Can anyone suggest another bank? Would interest rate be significantly higher than base rate? Estate includes a property of value significantly higher that IHT which which could be collateral.

RAS

Please can you keep to one thread! You've got four open, all of which contain vital snippets left out of other threads. Ask the mods to combine them.

Since your ex owned property, then you need to claim the Residential NRB as well as the NRB. So the IHT allowance goes up to £500k. Is there an outstanding mortgage?

Did your ex have any life insurance? If so who are the beneficiaries? What's happening with death in service payments? 

You need to pay 10% of the IHT owed. Can you garner enough from accounts which don't need probate to pay the first instalment?

bikeman

I am keeping the questions seperate. Too many people chip in and confuse. Keeping them seperate keeps the point focussed.

There is a small pension payment which is just short of the 10% so we will be ok. Thanks for that information.

bikeman

looking in more detail the gov website says 'You can pay 10% and the interest each year if you decide to keep the house to live in.'

That wont be the case. 

Also it's not very clear how much of the estate is allowable to be paid by installments. Is this just the case that if you had a house then you get to pay by installments regardless of the size of the estate?

poseidon1

bikeman said:

looking in more detail the gov website says 'You can pay 10% and the interest each year if you decide to keep the house to live in.'

That wont be the case. 

Also it's not very clear how much of the estate is allowable to be paid by installments. Is this just the case that if you had a house then you get to pay by installments regardless of the size of the estate?

No, the 10% instalment facility is specific to the house, or other illiquid assets such as private company shareholdings  ( 50% + control ) , farmland ( where 100% APR not available) etc.

However instalment facility not a free lunch and comes with interest chargeable at a rate that currently stands at 7.75% directly linked to bank of england base rates, so could go down ( a little ) in the medium term.

Keep_pedalling

I think you may have misunderstood what the gov site was saying, their is no requirement to live in the property to pay by instalments but once the house is sold all outstanding IHT has to be paid and no further instalments are allowed. So the only way you get to spread the payments over 10 years is if you plan to keep the property.

Which type of assets you can pay by instalments is clearly laid out on IHT400. 

For example

Divorcee Jane Doe dies and leave her entire estate to her two children

She leaves a house worth £800k and £100k in a cash ISA.

Her estate is £400k above her exemptions so will have an IHT liability of £160k.

If her executors opt for paying by instalments until the house is sold then they pay £40k to pay IHT in full on the cash and 10% (£12k) instalment on the amount due on the house.

If they sell the house 1 year after the death the outstanding £108k needs to be paid plus 6 months interest.

If on the other hand her children keep the house a further 9 instalments plus interest need to be paid, but it would probably be a cheaper option to take out a mortgage and pay off the IHT bill in full.

bikeman

So just so I understand. In my case the total estate is £970k. House is £500k and remainder £470k.

Exceptions are £500K so IHT is 40% of £470k = £188k

So if the IHT on the cash part has to be paid in full, thats the full £188k. So we cant pay the house IHT in 10% installments?

I should add that only £10k of the £470k is in cash, we have £100k pension payout, the rest is in shares and share isas. So that's a £78k shortfall to pay the IHT.

Marcon

bikeman said:

So just so I understand. In my case the total estate is £970k. House is £500k and remainder £470k.

Exceptions are £500K so IHT is 40% of £470k = £188k

So if the IHT on the cash part has to be paid in full, thats the full £188k. So we cant pay the house IHT in 10% installments?

I should add that only £10k of the £470k is in cash, we have £100k pension payout, the rest is in shares and share isas. So that's a £78k shortfall to pay the IHT.

See https://www.gov.uk/guidance/applying-for-a-grant-on-credit-for-inheritance-tax and read the section 

When you can apply for Inheritance Tax to be postponed

Keep_pedalling

bikeman said:

So just so I understand. In my case the total estate is £970k. House is £500k and remainder £470k.

Exceptions are £500K so IHT is 40% of £470k = £188k

So if the IHT on the cash part has to be paid in full, thats the full £188k. So we cant pay the house IHT in 10% installments?

I should add that only £10k of the £470k is in cash, we have £100k pension payout, the rest is in shares and share isas. So that's a £78k shortfall to pay the IHT.

Pensions usually fall outside of the estate, are you sure this is part of the estate? 

bikeman

Keep_pedalling said:

bikeman said:

So just so I understand. In my case the total estate is £970k. House is £500k and remainder £470k.

Exceptions are £500K so IHT is 40% of £470k = £188k

So if the IHT on the cash part has to be paid in full, thats the full £188k. So we cant pay the house IHT in 10% installments?

I should add that only £10k of the £470k is in cash, we have £100k pension payout, the rest is in shares and share isas. So that's a £78k shortfall to pay the IHT.

Pensions usually fall outside of the estate, are you sure this is part of the estate? 

I dont understand your comment. Yes the pension is most likely outside of the estate (though not necessarily because contributions were made within two years of death biut lets assume so). And I have not included it BUT the pension death benefit is nowhere near enough to pay the IHT.

Keep_pedalling

bikeman said:

Keep_pedalling said:

bikeman said:

So just so I understand. In my case the total estate is £970k. House is £500k and remainder £470k.

Exceptions are £500K so IHT is 40% of £470k = £188k

So if the IHT on the cash part has to be paid in full, thats the full £188k. So we cant pay the house IHT in 10% installments?

I should add that only £10k of the £470k is in cash, we have £100k pension payout, the rest is in shares and share isas. So that's a £78k shortfall to pay the IHT.

Pensions usually fall outside of the estate, are you sure this is part of the estate? 

I dont understand your comment. Yes the pension is most likely outside of the estate (though not necessarily because contributions were made within two years of death biut lets assume so). And I have not included it BUT the pension death benefit is nowhere near enough to pay the IHT.

Sorry, I misunderstood your previous post please ignore.