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At a Conservative conference fringe event organised by the Institute of Economic Affairs and the Taxpayers’ Alliance, Chancellor Sajid Javid hinted that he could cut Inheritance Tax. After being asked whether he would scrap the tax, Sajid Javid shared how he understood arguments against the tax and suggested that he’s considering changes.

In response to the question, Sajid Javid said:

“First of all, we’ve already made some sensible reforms in that tax.” He added, “I shouldn’t say too much now but I understand the arguments against that tax.”

“You pay taxes already through work or through investments and your capital gains in other taxes, there is a real issue with then asking them to, on that income, to pay taxes all over again.”

“Sensible changes have already been made but it’s something that’s on my mind.”

Although the Chancellor has hinted that there may be an Inheritance Tax reform, it’s clear that there are currently no firm plans and if discussions are underway, they are certainly in the early stages. However, it has got us thinking about what would happen if Inheritance Tax was cut. Would there be an alternative tax instead? How would the government cope without the £5.36billion (based on the figures from the 2018/19 tax year) collected from Inheritance Tax receipts? Would there be changes to tax on income to compensate for the lack of Inheritance Tax?

How Inheritance Tax impacts estate administration

Inheritance Tax is a tax on a deceased person’s estate when the value is above the £325,000 threshold. The estate includes any property, money and possessions. However, if everything is left to a spouse or civil partner, a charity or a community amateur sports club then there’s typically no Inheritance Tax to pay.

Inheritance Tax is such a significant part of the estate administration process and it is one area that tends to cause families dealing with a bereavement a significant amount of stress. It can be difficult to understand and Executors or Administrators are legally and financially responsible for ensuring the tax is dealt with correctly.

Office of Tax Simplification review of the tax

Back in January 2018, the previous Chancellor, Philip Hammond, requested a review of Inheritance Tax and since then the Office of Tax Simplifications have published two reports outlining ways in which the tax could be simplified. The reports offered suggestions around how the administrative and technical aspects of Inheritance Tax could be improved.

The first report suggested that Inheritance Tax forms should be simplified and shortened, an automated payment receipts system should be introduced and they should streamline the probate and payment process with HM Courts and Tribunals Service. Additionally, the second report suggested making changes in areas where technical issues tend to arise, such as lifetime gifts, Capital Gains Tax, businesses and farms, and life assurance and pensions.

Source: The Society of Will Writers

Sussex Will Writers help to inform our clients and readers of the latest industry news and developments. If you have any questions about any of the information on our blog or website, call us on 01903 533681 or get in touch by emailing: info@sussexwillwriters.co.uk

Sussex Will Writers 
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E: info@sussexwillwriters.co.uk

The latest family and household figures released by the Office for National Statistics (ONS) reveal that the number of cohabiting couple families continues to grow. Between 2008 to 2018, there has been a 25.8% increase in families of this type. Cohabiting couple families are even growing faster than married couple and lone parent families.

In 2018, there were 19.1 million families in the UK which includes:

12.8 million married couple families (67.1%)

3.4 million cohabiting couple families (17.9%)

2.9 million lone parent families (15%)

The ONS statistics, released in August 2019, also highlighted how the number of people living alone has increased from 7.7 million in 2017 to over 8 million in 2018. The rise has been driven by women aged 45 to 64 years and men aged 65 to 74 years.

Only marriage or civil partnerships give legal rights to partners. Therefore, it’s important for those cohabiting or living alone to ensure they have an up-to-date and valid Will to protect their loved ones.

The importance of keeping an up-to-date Will

If someone dies without a Will, the estate would be distributed following the rules of intestacy and those closest to the deceased may not necessarily inherit. For example, if someone in a cohabiting couple was to die, their partner would not be entitled to inherit in England, Wales and Northern Ireland. Although, in Scotland, the Family Law Act 2006 introduced some rights for cohabiting couples, such as allowing the surviving partner to make an application to the court for provision on intestacy. However, it still does not give cohabiting couples the same rights as married couples or those in a civil partnership.

An up-to-date Will which makes provisions for a long-term partner is the best way to negate the requirement for marriage or a civil partnership in order to look after a partner after death. By creating a Will, individuals can ensure their wishes are heard and their estate goes to their chosen beneficiaries.

With increases in the number of people cohabiting and living alone, Will Writers need to take this into account when creating Wills. Firstly, they need to ensure that their clients understand exactly how their estate will be distributed. Secondly, Will Writers need to consider family dynamics. A Will that has considered the make-up of the family and all eventualities is less likely to be contested and the estate is more likely to be protected. Additionally, Wills should be reviewed regularly to ensure that any major life changes are accounted for.

Source: The Society of Will Writers

Sussex Will Writers help to inform our clients and readers of the latest industry news and developments. If you have any questions about any of the information on our blog or website, call us on 01903 533681 or get in touch by emailing: info@sussexwillwriters.co.uk

Sussex Will Writers 
T: 01903 533681
M: 07734 744886
E: info@sussexwillwriters.co.uk

Many of you will already be aware that marriage revokes a Will unless it is clear that you were making it in contemplation of marriage, but did you know that divorce or the dissolution of a civil partnership also has an effect on your Will?

Section 18A of the Wills Act 1837 as amended by the Law Reform (Succession) Act 1995 s3(1) provides that where a person makes a Will and subsequently divorces, has their marriage annulled or dissolves their civil partnership then their former spouse or civil partner is deemed for the purpose of the testator’s Will to have died on the date that the marriage or civil partnership ended (the date on which the decree absolute or decree of dissolution was issued).

The consequence of this is that if the former spouse or civil partner has been appointed an executor or trustee under the Will then the appointment will not take effect. Similarly, if the former spouse or civil partner were to receive any benefit under the Will then this gift would fail and any substitute gift provisions would apply. If the former spouse was the only beneficiary and there were no substitute provisions then the estate would be distributed in accordance with the rules of intestacy, which may not be how you would like your estate to be distributed.

It is important to remember that if you are currently separated and going through divorce proceedings or dissolution but the decree absolute or decree of dissolution has not yet been issued then Section 18A will not prevent any appointments to your spouse or civil partner taking effect. For this reason you should consider amending your Will even before the divorce or dissolution is completed.

Finally, it is also possible to exclude the operation of Section 18A by including an express declaration within your Will to the effect of ‘Section 18A of the Wills Act 1837 as amended by the Law Reform (Succession) Act 1955 s3(1) shall not apply to my Will.’ This would be appropriate in circumstances where the Will is being prepared in contemplation of the divorce or dissolution.

Source: The Society of Will Writers

Sussex Will Writers help to inform our clients and readers of the latest industry news and developments. If you have any questions about any of the information on our blog or website, call us on 01903 533681 or get in touch by emailing: info@sussexwillwriters.co.uk

Sussex Will Writers 
T: 01903 533681
M: 07734 744886
E: info@sussexwillwriters.co.uk

Aretha Franklin died on the 16th of August 2018 at the age of 76 after an ongoing battle with pancreatic cancer. Recent news reports have now revealed how a handwritten Will has been discovered under a sofa cushion in the Queen of Soul’s home in Detroit. To ensure the Will’s validity, it is being examined by a handwriting expert.

It was originally believed that Aretha Franklin died without a Will, leaving her multimillion pound estate to the rules of intestacy. However, the lawyers for her estate revealed that three Wills have subsequently been found.

Initially, two handwritten Wills written in 2010 were found locked in a cabinet. These Wills revealed that the singer had named her niece Sabrina Owens and son Theodore White II as Executors of her estate. The third Will discovered under a sofa cushion was supposedly written in 2014 and names her son Kecalf Franklin as Executor.

The 2014 Will is reportedly difficult to decipher, so it needs to be determined whether it qualifies as valid Will. The Will has words crossed out, notes in the margins and the handwriting is hard to read in places.

Aretha Franklin’s estate is reportedly worth approximately $80 million (£62 million) and it is still unclear as to who will inherit the estate. If a Will is found to be valid then the estate should be distributed as per the wishes set out in the Will. On the other hand, if it’s ruled that the singer died intestate, then under the intestacy rules set out by Michigan state law, Aretha Franklin’s four surviving children would inherit an equal split of her estate.

The importance of leaving a valid Will

The uncertainty around how Aretha Franklin’s estate will be distributed highlights the importance of not only creating a Will but also ensuring that it is legal and stored in a safe place. Regardless of age, health and wealth, it’s crucial that people state their wishes in a Will. This avoids their estate being distributed in the predetermined way dictated by intestacy laws.

To make a Will in the UK, you must be 18 years old or over, make it voluntarily, be of sound mind and make it in writing. Additionally, you are required to sign it in the presence of two witnesses who are both over 18, and your two witnesses must sign the Will in your presence. You can’t name the witnesses or their married partners as beneficiaries in the Will.

You should also consider where you store the Will. The best approach to ensure your Will is found when the time comes is to inform your Executor(s) of where the Will is stored. Storing Wills at home can be dangerous as they are at risk of being damaged or destroyed in an accident such as a fire or flood. You could also store your Will with a professional company that offers Will storage, your solicitor, a bank or the London Probate Service.

Source: Kings Court Trust

Sussex Will Writers help to inform our clients and readers of the latest industry news and developments. If you have any questions about any of the information on our blog or website, call us on 01903 533681 or get in touch by emailing: info@sussexwillwriters.co.uk

Sussex Will Writers 
T: 01903 533681
M: 07734 744886
E: info@sussexwillwriters.co.uk

HM Revenue and Customs (HMRC) opened a staggering 5,537 Inheritance Tax investigations in the 2018-2019 tax year, which is a 3.4% increase in comparison to the previous 2017-2018 tax year. To put this number into perspective, this equates to nearly a quarter (23%) of the 22,000 estates where Inheritance Tax is due. With such an incredibly high proportion of estates affected, it raises concerns about whether those responsible for paying Inheritance Tax are aware of the risks if they make mistakes.

The role of an Executor or Administrator: Risks and responsibilities

Personal Representatives (Executors if there’s a Will or Administrators if there’s no valid Will) are responsible for administering someone’s estate when they pass away. This includes handling all the paperwork and paying the correct amount of Inheritance Tax, as well as dealing with assets, paying debts, handling Income Tax and transferring the inheritance to beneficiaries.

The role of an Executor or Administrator is not to be taken lightly as they have a legal and financial duty to ensure everything is dealt with correctly and in a timely manner. Among other responsibilities, they’re personally liable for the correct distribution of an estate, responsible for maximising the estate for the beneficiaries, and accountable if there are any errors on the Inheritance Tax return.

Many people are unaware of the risks and responsibilities that come with the role. A case reported by The Telegraph last year highlighted the serious repercussions that can occur when mistakes are made. A Personal Representative distributed an estate to the beneficiary as he was under the impression that the beneficiary would pay the Inheritance Tax bill. However, the beneficiary left the country leaving the Personal Representative to foot the £345,000 bill. This is a severe example, but it does highlight how Executors or Administrators need to ensure that the estate is administered correctly.

Simplifying Inheritance Tax

These new figures have come to light soon after the Office of Tax Simplification (OTS) revealed their recommendations to simplify Inheritance Tax. The OTS explored how the administrative and technical aspects of the tax could be improved after the Chancellor requested the review in early 2018.

The OTS followed a consultation process that received an unprecedented amount of interest and the findings have been outlined in two reports. The first report was published in November 2018 and looked at the administration of Inheritance Tax. The second report was introduced in July 2019 and explores the key complexities and technical issues surrounding how the tax works.

It is yet unclear how the government will implement the proposed changes if they take on board the recommendations, however, the high number of Inheritance Tax investigations further supports the need to make the tax clearer and easier to understand.

Source: Kings Court Trust

Sussex Will Writers help to inform our clients and readers of the latest industry news and developments. If you have any questions about any of the information on our blog or website, call us on 01903 533681 or get in touch by emailing: info@sussexwillwriters.co.uk

Sussex Will Writers 
T: 01903 533681
M: 07734 744886
E: info@sussexwillwriters.co.uk

On 22 July 2019, HM Courts & Tribunals Service released revised probate fees including costs for applications and additional copies of the Grant of Representation. Although the cost of the application has not changed, any additional copies will now be charged at £1.50 per copy, rather than the 50p that was previously charged.

The rise in the fee for additional copies is a substantial increase which equates to a significant mark-up per copy. Families applying for the Grant of Representation will typically need to order additional copies to give to organisations that are holding the deceased’s assets. Some organisations will need to see the Grant before releasing any funds. It is advisable to order sufficient copies when sending the application to the Probate Registry. Additional copies include:

• Official sealed copies of the Grant of Representation ordered at the time of application.
• Sealed and certified copies of the Will and Grant. They may be required if any assets are held overseas.
• Additional copies ordered after the Grant of Representation has been issued. This may include a copy of the Grant and the Will, if applicable.
• The new probate fees document outlines how individuals will continue to be charged £215 for applications when the net estate is over £5,000. If the net estate is under £5,000 then no fee will be charged.

Back in November 2018, it was announced that new legislation to implement a new, banded structure of probate fees had been presented before Parliament. Despite the proposed changes to probate fees being on the cards for so long, the introduction of higher fees is yet to come into action.

The probate fees order has still not been scheduled for debate in the House of Commons. Parliament returned from their summer recess on the week commencing the 2nd of September 2019 and the legislative debate did not appear on the week’s agenda. It’s still unclear when the probate fees order debate will take place and there’s unlikely to be any developments until Brexit decisions have been finalised. Furthermore, on the 10th September 2019, Parliament was suspended with MPs not due back until the 14th of October 2019.

If the proposal is passed by Parliament, the current flat fee could become tiered fees based on the value of the deceased’s estate. The tiered fees would start from £250 and could reach up to £6,000. Additionally, the current estate value threshold would be raised from £5,000 to £50,000, which could mean that every year approximately 25,000 estates may avoid probate fees.

Source: Kings Court Trust

Sussex Will Writers help to inform our clients and readers of the latest industry news and developments. If you have any questions about any of the information on our blog or website, call us on 01903 533681 or get in touch by emailing: info@sussexwillwriters.co.uk

Sussex Will Writers 
T: 01903 533681
M: 07734 744886
E: info@sussexwillwriters.co.uk

The deadline has now passed for individuals, including Executors and Administrators of estates, to reclaim Payment Protection Insurance (PPI). In order to claim money back for PPI, complaints needed to be submitted to the providers or Financial Ombudsman Service by the 29th of August 2019. Financial institutions had set aside money to cover the billions of pounds that remained unclaimed.

What is PPI?

PPI was intended to cover repayments on loan and credit products when individuals were unable to make repayments. It applied to cases where an individual couldn’t work due to illness, disability or death, or if they were made redundant. PPI was mostly mis-sold, especially between 1990 and 2010. Therefore, a high proportion of people who took out a credit card, mortgage or cash loan were likely to have a reason to complain that they were mis-sold PPI.

How could PPI claims impact estates?

Back in April 2019, the Society of Trust and Estate Practitioners (STEP) warned practitioners of an issue related to Payment Protection Insurance (PPI) claims against estates. They advised that if those administering estates didn’t investigate whether the deceased had PPI, they could be held liable for future claims against the estate.

Executors and Administrators are financially and legally responsible for administering the deceased’s estate correctly and maximising the value of the estate for the beneficiaries. They can be held personally liable for any errors or misdistribution.

The STEP briefing note stated: “Claims management companies, after 29 August 2019, may change their focus to pursuing outstanding claims on behalf of beneficiaries against the fiduciaries involved. The potential argument might be that fiduciaries, and their advisers, would have been expected to investigate whether estates were entitled to compensation.”

What happens if I missed the deadline?

Although the deadline has passed and most people will be unable to submit a claim, there are some exceptional circumstances where claims may still be possible.

1. Exceptional circumstances
If you missed the deadline due to exceptional circumstances, you may still be able to claim. Each case will be assessed on its individual merits and you will need an extremely good reason for not being able to claim earlier.

2. System failures
If you tried to claim in the immediate approach to the deadline, your claim could have been impacted by system failures. Many leading financial institutions suffered from system errors so you should immediately get in contact with them if you were affected.

3. Go to court
You can still make a PPI claim after the deadline via the small claims court. However, there’s currently a lack of evidence to suggest that this approach will work, and it’s likely that claims would need to be made within six years of the PPI being sold.

Source: Kings Court Trust

Sussex Will Writers help to inform our clients and readers of the latest industry news and developments. If you have any questions about any of the information on our blog or website, call us on 01903 533681 or get in touch by emailing: info@sussexwillwriters.co.uk

Sussex Will Writers 
T: 01903 533681
M: 07734 744886
E: info@sussexwillwriters.co.uk

The Office of Tax Simplification (OTS) has published its second report on Inheritance Tax. The report comes after the Chancellor requested a review of administrative and technical aspects of the tax back in January 2018. The first report was released in November 2018 and covered the administration of Inheritance Tax. This second report now explores the key complexities and technical issues that arise from the way the tax works.

The OTS followed a consultation process which included an online survey that received almost 3,000 responses, and a call for evidence which saw 500 email and 100 written responses. Additionally, the OTS received contributions from representative bodies, professional advisers and academics, among others. They also consulted with a wide range of organisations, including Kings Court Trust. With the astounding levels of interest shown about the review, the OTS has highlighted how the tax is unpopular and often misunderstood among members of the public.

The video below has been created by the OTS to provide a high-level summary of what the Inheritance Tax report is about:

The OTS has highlighted that fewer than 5% of all deaths (25,000 estates) are subject to Inheritance Tax each year. However, around 275,000 Inheritance Tax forms are still completed. OTS Chairman, Kathryn Cearns OBE said:

“Although only a small number of people pay Inheritance Tax each year, a far greater number worry about it. The OTS’s packages of recommendations would go some way to achieving the goal of making the tax easier to understand and simpler to comply with.”

In this second report, the OTS makes 11 recommendations which aim to make the structure of Inheritance Tax clearer and easier to understand. The recommendations are focused on three main areas which include lifetime gifts, interaction with Capital Gains Tax, and business and farms. Some of the key recommendations made by the report include:

1. Lifetime gifts

From consultations, the OTS found that the way in which the tax works in relation to gifts is complex, confusing and can require extensive record keeping. Therefore, they’ve suggested:

• Introducing an overall personal gifts allowance to replace the various lifetime gift exemptions. They suggest setting the allowance to a sensible level and incorporating a small gifts allowance. Additionally, they advise that the government should either reform the exemption for normal expenditure out of income or replace it for a higher personal gift allowance.
• Reducing the period during which a lifetime gift may be subject to Inheritance Tax to five years instead of the current seven-year period.
• Abolishing taper relief which is the rate of Inheritance Tax on gifts made more than three years before the date of death.
  
• The 14-year rule means that gifts made outside of the seven-year period need to be accounted for when calculating the Inheritance Tax due. The OTS recommends removing the need to account for gifts made outside of the seven-year period.
• Exploring options to simplify and clarify the rules on who is liable to pay tax on lifetime gifts and the allocation of the Nil Rate Band.

2. Capital Gains Tax

The report highlights how

“the interaction between Inheritance Tax and Capital Gains Tax is complex and can distort decision making.”

Typically, there is no Capital Gains Tax on death and the report implies that this stops people from passing assets to the next generation in their lifetime. Therefore, the OTS recommends that Capital Gains Tax should be changed as a result.

3. Businesses and farms

Businesses and farms are often not subject to Inheritance Tax as they may receive relief from the business property relief (BPR) or agricultural property relief (APR). The requirements to qualify for BPR are different from the conditions for Capital Gains Tax business reliefs. As a result, the OTS has identified that if the tests were standardised, it could be easier for business owners to decide whether to pass on their business during their lifetime or upon their death.

4. Life assurance and pensions

Currently, if a term insurance policy is written in Trust, it can make a huge difference to its Inheritance Tax status. Consequently, the OTS has advised the government to consider making death benefit payments from term life insurance Inheritance Tax free, removing the need for them to be written in Trust.

The OTS provides independent advice on how to simplify the UK’s tax system, to make improvements for taxpayers. It’s now down to the government and parliament to decide whether they wish to implement the changes. If you want to find out more about the recommendations, the full report released by the OTS can be found here.

Source: Kings Court Trust

At Sussex Will Writers, we frequently find that people are confused by the legal and tax affairs associated with administering a deceased person’s estate. Therefore, we hope that any changes that are made to the Inheritance Tax structure effectively simplifies the tax and makes it easier for families to understand.

Sussex Will Writers help to take care of the complicated practicalities after death, so you can focus on life’s important moments. If you have any questions about estate administration or Inheritance Tax, call us on 01903 533681 or get in touch by emailing: info@sussexwillwriters.co.uk

Sussex Will Writers 
T: 01903 533681
M: 07734 744886
E: info@sussexwillwriters.co.uk

Back in May 2019, we wrote about how probate registries in England and Wales were suffering from processing delays on Grant of Probate and Grant of Letter of Administration applications. We’re now a couple of months down the line and the backlog continues. Therefore, we wanted to provide our clients and business partners with another update.

The delays originally came after the rollout of a new IT case management system which dramatically slowed down processing applications. Despite government claims that the issues with the IT system have now been resolved, Executors, Administrators and estate administration providers are still waiting for Grants to be issued.

A spokesperson for the Ministry of Justice said:

“Our new online service is making probate simpler and more convenient for bereaved people. Some grants are experiencing delays of two to four weeks and we are working hard to bring waiting times down further. We apologise for any inconvenience caused.”

A Grant of Probate or Grant of Letter of Administration gives an Executor or Administrator the authority to act in the administration of a deceased person’s estate. Therefore, the delays have left those responsible unable to progress with the administration of estates.

The Law Society Gazette reported that before the delays, Grants were being issued within seven to 10 working days. However, people are now reportedly suffering from delays of up to 13 weeks.

Simon Hart, MP for Carmarthen West and South Pembrokeshire, posed a written question to the Secretary of State for Justice:

“what assessment has been made of the level of delays in the granting of probate as a consequence of the transition to the new online probate system.”

On 18 June 2019, Paul Maynard, Parliamentary Under Secretary of State at the Ministry of Justice, responded

“Urgent action has been taken to address the delays which have been experienced in the probate service. Her Majesty’s Courts and Tribunals Service is increasing staffing levels and further improving the digital service to help reduce waiting times.”

At Sussex Will Writers, we are doing everything we can to lessen the impact of the delays on those who have entrusted us to take care of their estate administration. We are frequently communicating with the Probate Registries to understand their current position and to progress our applications as quickly as possible. 

In a recent webinar about the reform of HM Courts and Tribunal Service (HMCTS), it was revealed that the probate registries are working very hard to catch up with the backlog. They’ve added around 30 members of staff, plus additional legal experts. They’ve advised those awaiting Grants to avoid calling wherever possible as this will slow down the process.

The Kings Court Trust have reported that additionally, the webinar shared new information about the government’s plans to close local probate registries and move the work to just one central location in Birmingham, as announced in April 2019. It was revealed that the reform will improve the accessibility to probate registries by centralising all calls into Birmingham. This means that HMCTS will be able to marshal the skills and knowledge into a single point, and manage the consistency of response both in knowledge and in speed of service. Plus, it is planned that the system will also allow professionals to check for updates on their Grants so that they will no longer need to call the registry.

Sussex Will Writers remain committed to providing our families and business partners with updates about the backlogs as and when we receive them.

Source: Kings Court Trust

Steve Worsfold has many years of experience in advice and guidance when it comes to making Probate applications. Get in touch with Steve by phone or email to discuss how he can help you navigate the complex procedures of obtaining a Grant of Probate. 

Steve Worsfold, Sussex Will Writers 
T: 01903 533681
M: 07734 744886
E: steve@sussexwillwriters.co.uk

This article looks at how Inheritance Tax works and which other taxes HMRC applies to the estate of a deceased person. 

When someone dies, their estate – their cumulative assets, money, investments and possessions, less any debts – will be passed on to their beneficiaries. These are usually family members but may also include friends and charities. If the deceased has left a Will, the beneficiaries will be named. The Will will also name an Executor – a person who the deceased has entrusted to ensure that their wishes are carried out. In the case of intestacy, where there is no Will, the entitled beneficiaries must be established in accordance with the rules of intestacy. This will be the role of the Administrator (who has exactly the same duties as the Executor – where there is a Will).

Whether you are the Executor or the Administrator, you will have responsibility for ensuring that all debts and taxes due are paid before any money and assets are distributed from the estate. This is a legal requirement and failure to carry out these duties can have serious consequences, which is why many people choose to appoint a professional adviser.

What is Inheritance Tax and who pays it?

Inheritance Tax is a tax on the deceased’s estate after they die. You may sometimes also hear the phrase ‘death duties’, though this term is now redundant as Inheritance Tax consolidated these multiple duties into a single tax in 1986. Technically, Inheritance Tax is a transfer tax on the net collective value of an estate as it passes from one person – the deceased – to another person(s). Like any other tax, it is collected by HMRC and like any other tax, there are requirements governing its payment and penalties for failure to comply.

How much Inheritance Tax do I have to pay?

Every estate benefits from a threshold of value below which no Inheritance Tax is payable. This is currently £325k, so if the deceased’s estate is valued at less than this, you will not need to pay any Inheritance Tax – though you will still have to complete the Inheritance Tax forms and show that the estate has been accurately valued. The exception to this rule is the estate of a married couple or civil partners (a couple joined by a civil partnership) where the first to pass away has left their entire estate to the surviving spouse or partner. In this case, you will not need to pay any Inheritance Tax unless the value of the estate exceeds £650k when the second person dies.

Inheritance Tax is levied at a rate of 40% on the net value of the estate beyond the nil-rate threshold. The net value of the estate is calculated by working out the gross value – the total worth of all assets – and then deducting any debts, such as mortgages, loans and credit card bills and bequests to charities. You also need to look at whether they made gifts of more than £3k to anyone in the seven years prior to their death – these would exceed the tax-free gift allowance and would therefore be considered as part of the taxable estate. There are also some exclusions that apply to certain types of landholding and to overseas property bequeathed to an overseas citizen. In these cases, you will almost certainly need the support of a professional adviser to accurately calculate a value for Inheritance Tax.

Who calculates Inheritance Tax?

It will be up to the Executor or Administrator to calculate the value of the estate and to identify any and all applicable deductions. In very small or simple estates this can be fairly straightforward but it’s surprising how quickly things can become complicated. Valuing property, art, antiques, jewellery and investments can often take time and require expert advice. A professional Administrator will take care of all of this for you.

When does Inheritance Tax have to be paid?

A Grant of Probate will not be given until confirmation is received from HMRC that all due Inheritance Tax has been paid. Since the Grant of Probate is the key to unlocking the estate for distribution to any beneficiaries, this means in practical terms that HMRC expects you to pay Inheritance Tax before you do anything else. Inheritance Tax should be paid within six months of death. If you do not pay it within this time, HMRC will start to charge interest on the overdue sum.

This may be another reason for seeking professional advice and support in calculating the value of the estate and completing HMRC’s Inheritance Tax forms. Also, any delay in paying Inheritance Tax will delay the distribution of the estate to other beneficiaries, which can lead to friction and conflict.

Which other HMRC taxes apply?

This will depend on the deceased person’s circumstances but there may be Income Tax due on earnings during the year until their death. This may include any rent collected on property and earnings from investments in the UK and overseas. You will need to complete a tax return for the estate on this income.

In some cases, Capital Gains Tax may also be payable if the value of the deceased’s property and any other sold assets has risen since they were valued for probate purposes. Beneficiaries inherit assets at their probate value so if this rises they are liable to pay Capital Gains Tax on the increase.

What happens if I don’t pay or don’t pay the right amount?

As the Executor or Administrator, you are responsible for accurately calculating and declaring any taxes payable from the estate. This is a legal responsibility and not to be taken lightly. Failure to discharge these duties accurately may leave you personally liable for any fines and interest due, particularly if you have subsequently distributed the value of the estate to other beneficiaries; they are under no obligation to provide funds to pay towards any miscalculations.

Source: Kings Court Trust

Steve Worsfold is an estate administrator with many years of experience in advice and guidance when it comes to Inheritance Tax. Get in touch with Steve by phone or email to discuss how he can help you navigate the complex procedures of Inheritance Tax. 

Steve Worsfold, Sussex Will Writers 
T: 01903 533681
M: 07734 744886
E: steve@sussexwillwriters.co.uk

or complete the form below.

This month, Sussex Will Writers are extending their Estate Protection Wills offer all through September.

You may be able to protect your property from being used to pay for Long Term Care fees

10% DISCOUNT ON THE USUAL FEE OF £580 FOR MIRROR ESTATE PROTECTION WILLS INSTRUCTED DURING SEPTEMBER.

If you would like to find out how Estate Protection Wills can help your family, please call Steve Worsfold at Sussex Will Writers to receive a 10% Discount from the usual fee of £580 for Mirror Estate Protection Wills instructed during September. 

Available: Until 30th September, 2019

Simply enter the discount code on the CONTACT FORM, along with your email and telephone number or quote the deal code over the phone when speaking with Steve. 

Copy and paste or type the code into the contact form or quote it when speaking to Steve. 

     SWWSEPT19