TAX BASICS

Which inheritance tax form do you need to use?

Once you inherit or receive an inheritance. You have to complete the inheritance tax form within 6 months of the person’s death. While the UK has several types of inheritance tax forms available, not all are applicable for every individual. For example, individuals who have received an inheritance may only need the IHT205. You can easily complete this online with HMRC, as this is a straightforward declaration. Let’s take a look at the various UK inheritance tax forms and explore which one is needed based on individual circumstances.

What is Inheritance Tax?

Inheritance tax is a tax levied on the ‘estate’ of a deceased person. The value of the deceased estate determines the amount you pay. This is determined by the assets (cash in the bank, investments, property or business, vehicles, life insurance payouts), less any debts. You can find out more about Inheritance tax over here.

Inhertiance tax rates in the UK

Importantly, there is usually no tax to pay if you meet the following criteria:

Either your estate is worth less than £325,000

If you give everything worth more than £325,000 to your spouse, civil partner, charity, or amateur sports club in your community.

If neither of the above requirements is met. For all assets in excess of £325,000, your estate is liable to pay tax at 40% when you pass away. If you have left at least 10 per cent of the net value to a charity in your will, then it will drop to 36 per cent.

However, depending on your circumstances, this £325,000 tax-free limit might be much higher – in some cases, as much as £500,000 or even £1 million.

Which inheritance tax form do you need?

You have to use IHT 205 in the following scenarios:

If the Gross Value of your estate is under £325,000, you have to use form IHT205.

If the Estate’s Gross Value is less than £650,000, then you can use form IHT 205. Also, you have an available transfer of a whole nil rate band, such as from a previously deceased spouse or civil partner.

You have to use form IHT205 when the estate’s gross value exceeds £1 million. Also, when there is the passage of assets to a surviving spouse or civil partner.

You have to use form IHT400 when the estate’s gross value exceeds £325,000. Also, when there is no passage of assets to a surviving spouse or civil partner.

There are numerous other forms for different purposes. You can read more about it over here on the Gov.UK website.

When you are filing for inheritance tax. It is always best to consult an expert regarding which inheritance tax form do you need to use, as they are complex and vary depending on various situations.

Sidharth Bharthan Menon
CEO, taxtotal​