Cash Q&A: Inheritance tax
Q: I recently inherited £150,000 from my father. I’m wondering whether I will have to pay tax on the money and how much would it be. I am in work and I am a higher rate taxpayer.
A: If you have received the money from the solicitor who has dealt with your father’s estate, any tax due should have already been paid as this is a condition of the solicitor obtaining probate (needed before any assets can be distributed). There is no need to report the inheritance on your tax return but you must, of course, declare any taxable income you receive from investing it.
If you are yet to receive the money, it may be that inheritance tax (IHT) payable on your father’s estate will reduce the amount. This will depend on the type and value of all the assets he left and how the estate is to be distributed.
In general, IHT is not payable on gifts to spouses or charity, qualifying business or agricultural assets and the first £325,000 of other assets. For further assets, IHT is payable at 40 per cent and it will depend on the terms of your father’s will which of the beneficiaries effectively bear the tax charge.
In some circumstances, it may be sensible for the terms of a will to be varied after the individual has died to reduce the overall IHT charge on the estate. But all the beneficiaries would have to agree to this action and it must be done within two years of the death. I hope that helps.
l Neil Whyte is a tax partner at PKF accountants and business advisers If you have a question you need answered, write to Jeff Salway, ℅ The Scotsman, 108 Holyrood Road, Edinburgh EH8 8AS or email:email@example.com. The above is for general purposes only and is not tailored for individual use. It does not constitute legal, financial or investment advice on any particular matter and must not be treated as a substitute for specific advice. No action should be taken in reliance of the information given. The Scotsman Publications Ltd and PKF accept no liability on the basis of this article.
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