HMRC summarises UK’s IHT measures taking effect in April 2024

HMRC’s guidance clarifies that personal representatives can apply to HMRC for a 'grant on credit' enabling them to pay the IHT before probate, without first having to seek commercial loans to raise the funds. The application process includes sending a completed form IHT400 (or equivalent in Scotland or Northern Ireland), declaring that the applicant is unable to release funds from the deceased's estate and indicating how much IHT can be paid.  If the application is granted, HMRC will postpone the payment deadline for all or part of the tax, although the applicant must undertake to pay the IHT within an agreed timescale. IHT is due by the end of the sixth month after a testator has died. HMRC will charge interest on any IHT not paid by this date. HMRC may also place a notice of the charge against any land or buildings in the estate at the land registry.

The tax-free (de minimis) amount for income of trusts and estates, included in Finance (No. 2) Act 2023, also comes into effect on 6 April. From that date, settlements and estates with income of all types up to GBP500 will not pay income tax on that income as it arises, although the tax-free amount is reduced for some groups of trusts set up by the same settlor. Where income exceeds that amount, tax will be payable on the full amount. For estates, the GBP500 tax-free amount will apply for every tax year of administration, but unused amounts do not roll over to subsequent years when reporting under informal procedures. The Trusts, Settlements and Estates Manual has been updated to reflect these changes.

Guidance has also been updated to clarify when gains from life insurance policies, life annuities and capital redemption policies are chargeable as income for the estate of a deceased person and estate beneficiaries.

HMRC has also provided further guidance on using its IHT helpline. It warns that helpline staff will not advise on whether pension schemes, life insurance products or discounted gift trusts form part of the estate or their value. Complex technical issues or issues around the interpretation of the legislation are also excluded from phone help and staff will not comment on whether exemptions, reliefs or thresholds apply before the form IHT400 has been submitted.

Sources

• HMRC
• ICAEW
• ICAEW (grant on credit rules)
• HMRC (guidance on how to apply for a grant on credit)
• HMRC (IHT manual 05123)
• HMRC (pensions manual 3240)