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When inheriting a property, it’s only natural that the idea of having to deal with extra taxes can add more stress to our lives. In terms of a time frame, most banks and lenders are sympathetic to your conditions and any Inheritance Tax owed will not be payable for up to 12 months after inheriting a property.
However, Inheritance Tax itself has plenty of conditions that affect if and how much needs to be paid and while you may have 12 months to make any payments, it’s important to know how much is owed.
Do I have to pay Inheritance Tax if I’m a direct relative?
The amount of tax you will pay on an inherited property depends on how closely related you are. As the current Inheritance Tax laws stand different relatives will pay the following:
Spouses or civil partners: Don’t have to pay any Inheritance Tax on properties.
Children (including adopted, fostered or stepchildren): While Inheritance Tax does need to be paid, there is a tax-free threshold on the first £425,000.
Any other family member: If left to any other family members, it counts towards the overall value of the estate, which ultimately determines how much is paid.
How can I calculate how much Inheritance Tax will be owed?
The amount of inheritance tax that needs to be paid on the deceased’s estate is calculated by applying a 40% tax rate on any part of the estate that reaches above £325,000.
The estate itself is calculated by combining the total worth of the property, money and possessions owned by the deceased.
Inheritance tax itself can quickly become complex, especially if you have no idea where to start. Knowing when the tax is due and how much you have to pay can make the entire process easier.
While we have shown you the basics on Inheritance Tax and how to calculate what is owed, there are other factors that can affect how much you pay. Depending on how the estate is split in the will, the tax-free threshold can be altered, more in-depth information on these intricacies can be found on our blog.
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