If you inherit assets from a loved one after they pass away, you may be required to pay inheritance tax to the British government. In order to shed more light on this topic, Prestige Tax and Trust Services asks: do you have to pay inheritance tax on joint property?
In most cases, you are not legally obligated to pay tax on inheritance. However, sometimes you could be required to pay income tax on any profit you accrue from these assets or capital gains tax if you sell them for a profit at a later date. If the deceased’s estate will not or cannot pay inheritance tax on the assets you inherit, you may also be required to submit this to HM Revenue and Customs (HMRC).
Type of ownership
We should also note that depending on your circumstances, you may be required to pay inheritance tax on anything you jointly owned with the deceased. This depends on whether you were ‘joint tenants (‘joint owners’ in Scotland) i.e. you both jointly owned the assets or you were ‘tenants in common.’ Known as ‘common owners’ in Scotland and ‘coparceners’ in Northern Ireland, the latter option means that you and the deceased each owned a part of the asset in question.
If you and the deceased were joint tenants, you will automatically fully inherit any asset you owned together after they pass away. If their estate’s worth eclipses the inheritance tax threshold (currently £325,000) and it cannot or will not pay its inheritance tax to HMRC, you may become responsible for paying inheritance tax on the asset you inherit to the government.
Tenants in common
Similarly, if you and the deceased own an asset as tenants in common, if the value of their estate eclipses the inheritance tax threshold, you may have to pay inheritance tax. This will only be the case, however, if there is not enough money in the deceased’s estate to pay its inheritance tax bill, which is the responsibility of its executor or administrator. In this case, you may be required to sell the asset in question and HMRC will inform you if you need to submit inheritance tax payments.
Prestige Tax and Trust Services
Depending on how you owned the asset, you may be required to pay inheritance tax on any joint property you inherit. Determining whether, how and when to pay inheritance tax on these assets can prove complex, so you may want to enlist the help of experts. At Prestige Tax and Trust Services, we have the knowledge, legal skills and experience needed to help you work out and pay inheritance tax.