When dealing with the estate of a deceased person, understanding the deadlines and penalties associated with inheritance tax returns is crucial. Specialist private client solicitor Emma Westsmith explains.
Private client solicitor Emma Westsmith
Deadline for submitting an inheritance tax return
In England, the deadline for submitting an inheritance tax return (IHT400) is 12 months from the end of the month in which the death occurred. For example, if the person died in August, the inheritance tax return must be submitted by the end of August the following year.
Penalties for late filing
Failing to meet the submission deadline can result in penalties:
Initial penalty: if the return is late £100.
Six-month penalty: if the return is more than six months late, an additional penalty of £200 is applied.
Twelve-month penalty: for returns delayed by more than 12 months, the penalty can increase up to a maximum of £3,000.
When HM Revenue and Customs will waive penalties
HM Revenue and Customs will waive penalties if they consider the executor has a reasonable excuse for the delay. This means the executor had taken steps to prepare the inheritance tax return, but an event beyond the taxpayer’s control prevented the inheritance tax return from being sent before the deadline. For example, the executor suffering a life-threatening illness or close bereavement shortly before the deadline.
Interest on late payments
In addition to penalties, interest is charged on any unpaid inheritance tax from the due date until the tax is paid in full. Interest is calculated daily, so prompt payment is essential to avoid additional costs.
From 20 August 2024 interest on unpaid inheritance tax will drop from 7.75% to 7.5%. That means if £100,000 was outstanding for a year the additional interest paid to HM Revenue and Customs would be £7,500.
Conclusion
Timely submission of the inheritance tax return and payment of any tax due is essential to avoid penalties and interest. Ensuring compliance with these deadlines can save the estate from unnecessary financial burdens and legal complications. The sooner the inheritance tax return is submitted, the sooner the application for grant of probate can be submitted and assets released to pay the tax due.
Instructing a solicitor to assist with preparing the inheritance tax return and application for grant of probate will mean you:
Save time dealing with asset holders and unfamiliar (and sometimes arcane “probate processes”);
Have advice on your options at every stage including when and how to release assets to pay tax; and
Make sure you claim the inheritance tax allowances the estate is entitled to (no inheritance tax = no interest!)
Julie West Solicitors are able to assist with all aspects of residential and commercial property, wills, trusts, probate and lasting powers of attorney:
After death (probate and estate administration)
To start a conversation with your solicitor phone us on 01372 383273 or complete our online enquiry form.
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