How much Inheritance Tax will I pay on my property?
When you inherit a property, it’s important to know what taxes you’ll have to pay and how much it’ll cost. However, with so many rules and exceptions surrounding Inheritance Tax, it can be tough to figure out if you have to pay any at all.
Our calculator is designed to let you know if and how much Inheritance Tax is owed. However, it only considers the property you inherit, not the deceased’s entire estate.
Inheritance Tax is a one-off payment on the overall value of the deceased’s estate. To calculate the total worth, the executor of the last will and testament adds up the value of all the assets held by the deceased and these include:
Residential or commercial properties
Stocks and bonds
Insurance policy pay-outs
When the executor comes to total the entire value of the estate, they will need to list out all the deceased’s assets and work out the value at the date of death. Once this has been totalled, any standing debts will be deducted, as they need to be settled. The executor should also keep records on how this was all worked out as HMRC can ask to see records up to 20 years after any Inheritance Tax is paid.
While the estate is split between all the beneficiaries, they don’t have to pay Inheritance Tax on what they receive. It is instead the job of the executor to organise the payment on any Inheritance Tax which is applied to the entire estate.
This tax is only applied to a person’s estate if it is valued at over £325,000 and anything above that value is taxed at the standard rate of 40%. For example, if the deceased’s estate totals £500,000 then only £175,000 will be taxed. This means that in that scenario, the amount of Inheritance Tax will come to £70,000
Once the total figure has been calculated, it’s up to the executor to organise the payment through the deceased’s estate. Inheritance Tax does have a grace period to allow everyone involved to grieve and organise the distribution of assets as stated in the will, but it should be paid within 6 months after a person’s death, or HMRC will begin to charge interest.
If the total value of the estate does reach over £325,000, there are ways that Inheritance Tax can be avoided, but this needs to be organised by the deceased when they write their will. By leaving everything to a spouse or civil partner, no Inheritance Tax needs to be paid on any part of the estate. This is a common method as once the beneficiary has received the estate, they can distribute it as the deceased saw fit without having to take anything away from the inheritance.
With a tax-free threshold of £325,000 many executors won’t have to worry about Inheritance Tax. Typically, the largest part of the estate is any property held by the deceased such as the family home and while this is usually left to their spouse or children, the threshold for Inheritance Tax can vary.
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.
Inheritance Tax Calculator
Tax to pay is
IMPORTANT! Our tax calculators work on assumptions and the data that you input. While we’ve tried to make them as accurate as possible, your unique, individual circumstances may alter your result in a way that our calculator can’t account for.
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