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The inheritor is responsible for paying the inheritance tax on any assets he or she has inherited. The time limit for this payment is six months from the date of the death of the deceased. If this tax is paid after this deadline, the inheritor has to pay interest on the delayed payments. To pay it, one needs to seek a reference number from the authority (HM Revenue and Customs, aka HMRC). You need to have this number at least 3 weeks before the date of making the tax payment. For getting this number, you can either apply online or send the request by post. Once you receive this number, you can pay the stipulated tax through your own or joint bank account, account owned by the deceased, NS and I, and government stock.
However, the tax is levied only when the deceased's assets exceed the 325,000 pound threshold (financial year 2014-15). Sometimes the money is paid by the executor or personal representative. In these cases, the money generally comes from the estate left by the deceased. If for some reason, the executor or the personal representative make the tax payment, then they can recover it after the assets are passed on to the rightful heir or after selling the assets. The tax laws should be thoroughly understood as not everybody who is a member of the family of the deceased need to pay the tax. Only those who have received the inheritance need to pay it if the passed on property falls in the threshold stipulated by the law.
To know the rate of inheritance tax, you will have to approach the authorities. Once you know the exact amount to pay, you can send the payment to the authority. Sometimes it is difficult to ascertain exact amount, in such cases, you can make payment based on a rough assessment. If you have overpaid, the authority returns the balance amount. However, you do not receive receipts of such payment from the authority. It is solely your responsibility to verify and ensure that your payment has reached them. If for any reason, the tax does not reach them, they will consider it unpaid and start charging interest after the six month stipulated period is over.
The time taken for processing of the tax amount by the authorities depends on the means of transfer you have used. Online payments and mobile transfer are quicker as compared to cheque payments. You are supposed to address all these transactions to the authority by its name only, in this case HMRC.
Family think about their child's future with a will.
However, if you do not want to make onetime payment because of certain reasons, then you can seek the installment option. You have to mention this on your tax account form. You would be charged interest as per the rule. The first installment is generally due after the six months period and then followed by yearly ones. The installments duration cannot exceed 10 years period. One thing you should make sure is that which of the assets are allowed for installment benefit and which are not. Verify everything from the authorities to play safe.
The laws differ a bit for Trusts. However, most of the things like six-month period and seeking the reference number stay the same.
Avoiding inheritance tax could be a bit challenging for the beneficent but it will require some research. But this step can certainly free your loved ones from tax burden, although such advice is not legal in nature. The law gives rebate on tax if you transfer to certain family members like your wife. Also, the threshold is also defined by the law. So, if the assets are distributed in smaller portions to the family, it may help in reducing some burden of taxation.