If you are the executor of someone’s estate, you will need to ask yourself; how you will submit their inheritance tax payments to HM Revenue and Customs (HMRC). Not everyone knows but it is actually possible to pay inheritance tax through the deceased’s bank account. Prestige Tax and Trust Services explains how to utilise this payment method.
Paying inheritance tax
If the estate’s worth eclipses a specific threshold (currently £325,000), as its executor you will be required to pay an inheritance tax of 40% on its remaining assets. To avoid paying interest, you should submit inheritance tax payments by the end of sixth month after the deceased’s passing.
There are a number of means through which to pay inheritance tax to HMRC. You can, for example, do so through your bank or building society, by cheque through the post or even pay by installments. With these options, you may be forced to take payments from your own bank account and recover them later from the deceased’s estate, placing a significant financial burden on your shoulders.
Alternative payment method
If you wish to avoid this, you can pay inheritance tax from the deceased’s bank account instead. With this option, which is called ‘direct payment scheme,’ you can direct the deceased’s banks or building societies to pay some or all of their estate’s inheritance tax direct to HMRC. To do this you should:
- Ask the financial institution in question to make you a ‘personal representative’ of the deceased’s account. You can do this before you apply for probate (or confirmation in Scotland), so you can pay inheritance tax as soon as possible.
- Obtain an inheritance tax reference number, which you will need to execute payment to HMRC. Then you need to complete the IHT423 form and send a copy of this form to each financial institution you wish to pay inheritance tax from.
- You will then need to send these forms, along with two other forms and any supplementary pages or supporting documents to HMRC. The other forms you will need to send to HMRC are the inheritance tax account form IHT 400 and the probate summary IHT421 form (which is the confirmation C1 form in Scotland).
After you have completed these steps, the banks and building societies in question will pay the deceased’s inheritance tax to HMRC. The governmental tax agency will then stamp and return either the probate summary IHT421 form or the confirmation c1 form to you as proof of payment.
Prestige Tax and Trust Services
By utilising the direct payment scheme, you will be able to handle your obligations as the executor of someone’s estate as efficiently as possible. You may wish to enlist the help of experts in this field to ensure that not only can you utilise this payment option effectively, but handle your wider obligations as an executor. Prestige Tax and Trust services provides the expertise required to serve as the executor of someone’s estate once they have passed away.