Inheritance tax - basic question

homeless9

Is inheritance tax based on what individuals are receiving or the whole house/estate?

Say the tax threshold is £500k. Anything over this is taxed. Say the estate in question is worth £1million. Say the £1million is split between 4 siblings, so £250k each....

Is inheritance tax paid 'at source' because the amount of the estate was above the threshold, or is inheritance tax not paid because each individual got £250k which is below the threshold?

Thanks.

FlorayG

Inheritance tax is paid by the estate before the remainder is distributed. If you think about it, taxing after distribution would leave a way out of paying it by leaving small amounts to lots of people

Aretnap

It's paid by the estate, on the value of the estate as a whole, before any money is distributed to beneficiaries. So it makes no difference to the IHT bill whether the estate is going to a single person or being split between lots of people.

Keep_pedalling

FlorayG said:

Inheritance tax is paid by the estate before the remainder is distributed. If you think about it, taxing after distribution would leave a way out of paying it by leaving small amounts to lots of people

Which is how it works in the Republic of Ireland. The recipients are the ones taxed not the estate, and the tax applies to both inheritances and lifetime gifts. 

Keep_pedalling

Although the estate pays any IHT, it may not impact all beneficiaries equally as the will may state that certain bequests are paid without deductions from tax. 

Andy_L

Keep_pedalling said:

FlorayG said:

Inheritance tax is paid by the estate before the remainder is distributed. If you think about it, taxing after distribution would leave a way out of paying it by leaving small amounts to lots of people

Which is how it works in the Republic of Ireland. The recipients are the ones taxed not the estate, and the tax applies to both inheritances and lifetime gifts. 

Although the RoI has no tax free allowance for IHT, you pay 33% on everything so the number of beneficiaries makes no difference to the total tax bill

Keep_pedalling

Andy_L said:

Keep_pedalling said:

FlorayG said:

Inheritance tax is paid by the estate before the remainder is distributed. If you think about it, taxing after distribution would leave a way out of paying it by leaving small amounts to lots of people

Which is how it works in the Republic of Ireland. The recipients are the ones taxed not the estate, and the tax applies to both inheritances and lifetime gifts. 

Although the RoI has no tax free allowance for IHT, you pay 33% on everything so the number of beneficiaries makes no difference to the total tax bill

I don’t think that is correct.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-groups-thresholds.aspx

Andy_L

Keep_pedalling said:

Andy_L said:

Keep_pedalling said:

FlorayG said:

Inheritance tax is paid by the estate before the remainder is distributed. If you think about it, taxing after distribution would leave a way out of paying it by leaving small amounts to lots of people

Which is how it works in the Republic of Ireland. The recipients are the ones taxed not the estate, and the tax applies to both inheritances and lifetime gifts. 

Although the RoI has no tax free allowance for IHT, you pay 33% on everything so the number of beneficiaries makes no difference to the total tax bill

I don’t think that is correct.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-groups-thresholds.aspx

Confusing. The next page that gives the rates (which is the one I looked at) is saying that the threshold amount is nil rather than the £20k-£400k that your page shows

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-rates.aspx

Keep_pedalling

Andy_L said:

Keep_pedalling said:

Andy_L said:

Keep_pedalling said:

FlorayG said:

Inheritance tax is paid by the estate before the remainder is distributed. If you think about it, taxing after distribution would leave a way out of paying it by leaving small amounts to lots of people

Which is how it works in the Republic of Ireland. The recipients are the ones taxed not the estate, and the tax applies to both inheritances and lifetime gifts. 

Although the RoI has no tax free allowance for IHT, you pay 33% on everything so the number of beneficiaries makes no difference to the total tax bill

I don’t think that is correct.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-groups-thresholds.aspx

Confusing. The next page that gives the rates (which is the one I looked at) is saying that the threshold amount is nil rather than the £20k-£400k that your page shows

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-rates.aspx

I think ‘nil’ in that able refers to the amount of tax payable in the threashold rather that the level of threashold.