In this section:
- PAYE for agents and advisers
- Self Assessment for agents and advisers
- VAT for agents and advisers
- Corporation Tax for agents and advisers
- Tax credits for agents and advisers
- Acting as a tax agent for a CIS contractor or subcontractor
- Capital Gains Tax basics for agents and advisers
- Inheritance Tax for solicitors and tax advisers: the basics
- Trusts for agents and advisers: first steps
- Get started with our online services for agents and advisers
Inheritance Tax for solicitors and tax advisers: the basics
As professionals such as solicitors and tax advisers, you will probably handle Inheritance Tax issues on behalf of your clients, either planning clients' legacies and related tax affairs or dealing with the estate of someone who has died.
If you are managing an estate following a death, you'll need to assess whether it's liable for Inheritance Tax by calculating its value and notify HM Revenue & Customs (HMRC). If Inheritance Tax is payable, you'll need to work with the personal representatives of the estate to make sure any liabilities - including any issues related to trusts and Capital Gains Tax - are settled.
This guide provides an overview of the processes you need to follow to manage your client's Inheritance Tax affairs and signposts to more detailed guidance on Inheritance Tax planning.
On this page:
- Checking if Inheritance Tax is due
- Calculating an estate's value
- Wills, probate and personal representatives
- Forms for Inheritance Tax and probate
- Authorisation to deal with HMRC on a client's behalf
- Paying Inheritance Tax
- Helping clients plan legacies and Inheritance Tax issues
- More useful links
Checking if Inheritance Tax is payable
Inheritance Tax will be due on your client's estate if its value is above the Inheritance Tax nil rate band.
Current and historical nil rate bands for Inheritance Tax
If the value of your client's estate is below this figure, it is likely to be an ‘excepted estate' and no Inheritance Tax will be due. There are two other types of excepted estate.
In simple terms, these are:
- exempt estates - where the gross value of the estate is less than £1million and there is either a spouse or civil partner exemption, a charity exemption, or both
- foreign domiciliaries where the person who died lived outside the UK and the gross value of the estate in the UK doesn't exceed £150,000
If the death was before September 2006, different rules apply.
Excepted estates rules - If the death was before 1 September 2006
Calculating an estate's value
When calculating the value of a client's estate, you must always use the ‘open market value' - the realistic selling price.
If the initial indications are that the estate will be an excepted estate, you can use estimated values on all the assets.
If you think the value will be close to or above the nil rate band and you do not know the exact value of any of the estate's assets - such as a tax refund or a bill that will shortly become due - you should use estimates of current market value.
How do I value the assets of an estate?
Some gifts made by the person who has died in the seven years before their death may still need to be counted as part of the estate.
Gifts that are exempt from Inheritance Tax
Where an estate is partly exempt from Inheritance Tax but there is still some tax to pay, you will need to ‘gross up' all legacies that are paid free of tax to achieve the correct valuation.
You may also need to do this where there is a transfer of unused nil rate band.
If the person who has died was receiving payments under an annuity and payments are guaranteed for a period after the death, the right to receive these payments is an asset of the estate and you will need to work out an open market value for them.
Wills, probate and personal representatives
Whoever administers the estate is referred to as a ‘personal representative'. You may either be a personal representative yourself (ie an executor or administrator) or working in an advisory capacity to the personal representative.
Inheritance Tax and the probate process
Applying for probate or confirmation
Forms for Inheritance Tax and probate
The forms you and your clients will need for Inheritance Tax and probate will depend on whether the estate is excepted or not and where the person who died was living.
Find the right Inheritance Tax and probate forms
If Inheritance Tax is payable, you first need to obtain an Inheritance Tax reference. You can do this online.
Inheritance Tax reference request
Once you have the Inheritance Tax reference, you can complete the form IHT400 (previously the IHT200).
Forms for estates where Inheritance Tax is payable
Authorisation to deal with HMRC on a client's behalf
When you're handling estate affairs for your client, HMRC must hold a written authority from your client for HMRC to discuss details with you.
If you are solely dealing with Inheritance Tax issues for a client, the Inheritance Tax forms IHT100 and IHT400 provide an authorisation for you to discuss Inheritance Tax matters with HMRC. Otherwise you need to provide a letter from your client that shows they are happy for you to do so.
Trust matters are covered by the form 64-8 and the online agent authorisation service, so if you are also handling other tax matters for clients that are covered by the form, such as Income Tax Self Assessment or tax credits, it's a good idea to use the form 64-8 or online authorisation service. This will avoid having to provide additional authorisation letters and save time for you and your clients.
Agent authorisation and form 64-8 in trusts and administration period cases
Get authorisation to act on a client's behalf
Paying Inheritance Tax
The personal representatives are responsible for paying Inheritance Tax - usually from funds owned by the estate, although you may also pay it on their behalf from a client account or an executor account in some circumstances.
Helping clients plan legacies and Inheritance Tax issues
In many cases, you will be helping clients plan their estates and minimise future Inheritance Tax liabilities.
Inheritance Tax planning is complex area, with issues such as the Inheritance Tax implications of lifetime gifts, transferring assets into trust and any resulting Capital Gains Tax to consider.
Gifts that are exempt from Inheritance Tax
Lifetime transfers guidance in the HMRC Inheritance Tax staff manual
You can also consider if specific reliefs, such as Business, Agricultural and Woodlands Relief, are relevant for your clients.
More useful links
HMRC Inheritance Tax staff manual
