Inheritance tax: laws in Scotland

If you have been appointed executor of a loved one’s estate, it can feel as though you are expected to carry out an overwhelming number of complicated tasks and there are many things you need to be aware of in order to fulfil their wishes.

By making contact with an experienced executry solicitor in good time, executors can relieve themselves of much of the pressure and get the help and advice they need

As trusted personal law solicitors, many of Gibson Kerr’s clients go to them with concerns about what taxes are payable on a deceased’s estate, as it is vital that these are calculated and taken into account before beneficiaries’ legacies are paid out.

Inheritance tax on estates

The main tax to be aware of is inheritance tax, which is a percentage of the overall estate that needs to be paid. Some of the laws surrounding the payment of Inheritance Tax (IHT) can be complex and technical, and a solicitor is able to offer clear and practical advice on calculating and paying IHT.

What are the exemptions?

The good news is that IHT isn’t payable on all estates. As a general rule, it’s only due if the total value of the deceased’s assets is more than £325,000. That means the first £325,000 is free from inheritance tax but any assets over this value will be subject to IHT at 40%. However, there are some key exceptions to this rule you should be aware of and here we will outline the main ones:

- Any assets passing to the deceased’s surviving spouse or civil partner are free of inheritance tax, regardless of the total value;

- If the deceased had a spouse or civil partner who died before them, their unused inheritance tax allowance may be available, meaning the threshold increases to a maximum of £650,000;

- Any assets passing to a registered charity are free of inheritance tax, again regardless of the value;

- If the deceased’s property is left to a direct descendant, an additional residence nil-rate band applies. This is currently £175,000, or £350,000 for a couple.

Factor in lifetime gifts

It isn’t just the assets of a loved one that they owned at death that can be subject to IHT. You need to bear in mind that it can also be payable on gifts made by the deceased in the seven years before their death. The value of those gifts has to be added to the value of the estate to see if that pushes it over the threshold. Exemptions to this include small gifts (like birthday presents) that can be treated as ‘exempted gifts’, along with gifts given to a spouse or civil partner.

Also, if someone has transferred property or items for less than their actual market value (eg, selling a property to a family member for less than it’s worth), the difference in value is treated as a gift for IHT purposes. However, the amount of tax payable on a lifetime gift depends on how long before the death the gift was made and this reduces over time.

Potential penalties if you delay payment

Executors need to be aware that inheritance tax should be paid within six months of the death, or interest will be applied, increasing the amount due. This means they will need to begin work quickly – especially at the moment when many businesses are working remotely, everything can take longer to process than usual.

Other taxes

The estate may also be liable to income tax on any income earned during the period of administration, and capital gains tax on assets sold by the executors. The executor will also have to ensure that any taxes which the deceased person was liable for before they died have been paid.

Here to help

With complex legal processes and timing being of the essence, executors are often left feeling stressed and overwhelmed. However, by making contact with an experienced executry solicitor in good time, they can relieve themselves of much of the pressure and get the help and advice they need.

Gibson Kerr Personal Law Partner Lindsay Maclean is a trusted expert in this area, having been appointed Regional Director for the Scottish Branch of Solicitors for the Elderly, and has assisted many people through this difficult process. Lindsay and her team are happy to help you with the process of administering an estate, including calculating and paying any taxes due. They are working remotely and able to hold a telephone or video meeting with you (through Skype, Zoom or similar).

Please get in touch 0131 202 7516 or email [email protected], or visit for more information.