Methods of Paying Inheritance Tax

There are several methods that you can use for paying inheritance tax. Having an idea of the various methods will enable one to pay the taxes effectively.

One has to pay the inheritance tax by the end of the sixth month after the death of a person. For example, if the individual expired in January, then you must clear the tax by 31st July. There is however different due dates if you are making the payments on the trust. HMRC will be charging interest if you do not pay by the date mentioned. 

How to pay the inheritance tax

At first, you will need a reference number for the payment that you will be making. With the help of the reference number, you can make the payment of the inheritance tax bill.

For getting the reference number, contact HMRC three weeks before you are scheduled to make the payment.

For this, you can either apply online or use the form IHT 422 for getting the reference number.

You’ll need to get an Inheritance Tax reference number from HM Revenue and Customs (HMRC) at least 3 weeks before you make payment. One must not use the 15 digit number from the online tax service for reporting about the value of a property or estate.

Pay from your bank account

Paying inheritance tax is possible from your bank account. The bank account can be your account or a joint account with the expired individual. This can be done using telephone or online banking, using the bank at the society, or using CHAPS or Bacs. Paying inheritance tax by cheque will not be possible because of the ongoing pandemic. You can also get back the money from the estate of the deceased or even from the beneficiaries once you get probate. 

Paying from accounts owned by the deceased

Paying inheritance tax is also possible by using the deceased individual’s government stock or bank accounts. The bank accounts might include national savings and investment accounts too.

If you are not aware of the amount of money that you need to pay, then you can make the payments beforehand. These are called payments on account.

Check whether your payment has been received

For the payments you make, HMRC does not send any kind of receipts. They will only let you know when you have completely paid all the inheritance taxes due. If you have paid through the bank or the building society, then be sure to check the balance statement to understand whether the payment has been done.

If you overpay, then HMRC will refund the excess amount to the individual. HMRC will also pay you interest on the amount that you have paid more. This is usually done after the person has been given probate. Probate means the right to deal with the expired individual’s property, possessions, and money. 

For receiving the refund amount, you will have to write to HMRC, with Repayment written at the top of the letter. One must include the person’s name, bank account details where the refund amount must be sent. The letter must then be signed by the people who have signed the forms IHT 100 and IHT 400. If you are an agent who is working on the estate’s behalf and you are not asking for the money to be paid in a different account, you will just have to sign the letter.

These are some ways of paying inheritance tax that you must be aware of. Having a good idea will help you to understand which method is suitable for your needs.

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