There is no tax where everything is left between husband and wife and the survivor is domiciled (has their permanent home) in the United Kingdom. Beyond that relationship, tax may be payable and varies depending on Budget changes. From 2013-14 tax year no tax is charged on estates where the net value is under £325,000. This includes the value of the house and gifts within the last seven years except for those which are exempted: that is £3,000 in each tax year, plus £3,000 from the previous year if this was not used. Outright gifts to any one person of £250 or less are exempt. Exemption is also allowed on wedding gifts – up to £5,000 by each parent or step-parent, £2,500 by each grandparent or great-grandparent, or £1,000 by people outside the categories mentioned.
Gifts made during one’s lifetime and transfers on death, to charities established in the United Kingdom, political parties, housing associations or for ‘national purposes’ e g a museum or university, are also exempt.
If the person’s death results from wounds inflicted, accident occurring or disease contracted while a member of the armed forces and engaged on active service against an enemy, or from a disease contracted at some previous time, the death being due to or hastened by the aggravation of the disease and their circumstances meet the conditions set out in Section 154 of the Inheritance Tax Act 1984 the estate may be exempt from inheritance tax. In such cases the executor or administrator should contact the Ministry of Defence for a certificate of exemption.
In most cases the tax must be paid before probate/administration is granted and the personal representative may find that a bank or building society is unwilling to release money held in the deceased’s account – in which case it may be necessary to raise a loan for the tax and for probate court fees. The loan may be repaid from the estate after the grant has been issued and the assets released.
Tax on certain items such as houses, land, etc may be paid by instalments over a period of ten years. Further information and leaflets on inheritance tax may be obtained from The Capital Taxes Office. Once the application procedures have been completed and the inheritance tax and probate court fees paid, the grant of representation will be issued in the form of the probate/administration document. Enclosed with the document will be a statement of the gross and net value of the estate and a copy of the will – the original will is then kept at the Probate Department at the Principal Registry of the Family Division.