How Much Inheritance Tax Will I Have to Pay

How Much Inheritance Tax Will I Have to Pay?

Following a death, there are all kinds of questions needing to be answered, many of which are to do with the logistics and finances around Probate. One of the questions we hear the most often is – how much inheritance tax will I have to pay?

What is inheritance tax?

Before you can apply for a Grant of Probate, your solicitor will need to work out how much inheritance tax is due on the estate. This is a one-off payment to the government that will need to be paid within six months of the date of death.

To give you a rough idea of how much your inheritance tax will be so you can budget beforehand, we’ve written up the basics for you.

How much is the estate worth?

Firstly you’ll need to work out how much the estate is worth. This will include property, money and possessions, and you’ll need to have proof of the value of these things from reputable professionals.

We recommend that you get three different valuations on any property inherited as there can be problems later on if you undervalue the property and don’t pay enough inheritance tax. If you have three valuations then you can prove that you were advised professionally on the value and weren’t trying to avoid paying your inheritance tax!

What is the limit for paying inheritance tax?

So once we know how much the estate is worth, we can see how much inheritance tax you’ll have to pay, if any.

The bottom limit on paying inheritance tax is £325,000. This means that if you have inherited an estate valued at less than this figure, you won’t have to pay any inheritance tax at all. Your solicitor will still need to send off some paperwork stating this though.

How much inheritance tax will I have to pay on over £325,000?

If the estate you’ve inherited is worth more than £325,000, the fee payable is 40% of anything over that sum.

For example:

  • Up to £325,000 would incur a £0 inheritance tax charge.
  • £350,000 would incur a £10,000 inheritance tax charge.
  • £400,000 would incur a £30,000 inheritance tax charge.
  • £500,000 would incur a £70,000 inheritance tax charge.
  • £750,000 would incur a £170,000 inheritance tax charge.
  • £1million would incur a £270,000 inheritance tax charge.

Are there any exceptions to inheritance tax?

The exceptions to this rule are if you donate more than 10% of the entire estate to charity, the inheritance tax charge is reduced to 36% and in some cases this may make more sense financially.

Other exceptions include if the estate is being left to the legal spouse or civil partner of the deceased or if the deceased was in the military and died in the line of duty. In both these cases, no inheritance tax is due.

If you’d like to discuss inheritance tax or any matters of Probate with us further, don’t hesitate to get in touch on 0207 4065875.

About the Author Ellie Pierpoint

Ellie is a resident writer for Best Value Probate, covering topics such as Probate, wills and other legal proceedings.