If you’re the executor of somebody’s estate, it’s your job to handle inheritance tax matters. With this in mind, Prestige Tax and Trust Services explains how to transfer inheritance tax.
If somebody’s estate is worth over £325,000, it’s required to pay an inheritance tax of 40% of anything above the threshold to the government. But what if the estate doesn’t use the entirety of its allowance? Is this threshold confined to one person or can the executor share their inheritance tax allowance with others?
If the estate doesn’t use the entirety of its inheritance tax allowance, the remainder can be transferred to other people. However, under UK law the allowance can only be shared with the deceased’s spouse. This would mean that the surviving partner has an inheritance tax threshold of up to £650,000.
There are certain exceptions to this rule. The allowance can’t be transferred if the first spouse passed away before 1975, or the surviving spouse had an unsecured pension as the ‘relevant dependant’ of a person who died with an Alternatively Secured Pension. It also can’t be transferred if the estate of the first spouse qualified for relief on woodland/heritage assets.
How to transfer
If somebody wishes to transfer their allowance to their spouse, they must do so in their will. It’s then your job as the executor of their estate to complete the legal processes necessary to make the transfer. You do this during the process of working out inheritance tax.
After you’ve conducted the necessary calculations to determine how much of the deceased’s inheritance tax threshold you can pass onto their partner, you need to fill out form IHT402. Send it with the other inheritance tax forms as normal to receive a grant of representation, which you’ll need to administer the deceased’s estate.
Prestige Tax and Trust Services
Transferring an inheritance tax allowance can be complex. If you need help to carry out your duties as the executor of somebody’s estate, you should contact Prestige Tax and Trust Services. Our team has the legal expertise you need to ensure these duties are fulfilled in accordance with UK law.