From 1 April 2024, personal representatives seeking to obtain probate will no longer need to seek a commercial loan to pay Inheritance Tax, before applying to HMRC for a grant on credit.
When an individual dies, their Personal Representatives (PRs) must pay all or part of the Inheritance Tax (IHT) due on the estate before they can obtain a grant of representation. This grant then allows the PRs to realise estate assets.
- Where an estate includes cash assets, such as those held in bank and building society accounts or National Savings and Investments products, the Direct Payment Scheme can assist in releasing money directly to HMRC to settle the IHT.
Difficulties can occur where an IHT liability arises on an estate which consists largely or exclusively of illiquid assets, such as land and buildings or shares in a private company, which cannot be realised by the PRs until Probate is granted.
- To mitigate such issues, HMRC allows PRs to postpone payment of all or part of the IHT payable in certain circumstances, allowing them to obtain a grant of representation.
- This process is referred to as ‘grant on credit’ and ultimately allows the PRs to access the assets in the deceased’s estate to settle the IHT due.
Before allowing a grant on credit, HMRC expect the PRs to make every effort to raise funds to pay the IHT, considering all financial sources, including their own assets.
In the past, PRs may have borrowed from a commercial lender to finance the IHT due before obtaining probate.
- From 1 April 2024, PRs are no longer expected to seek commercial loans to pay IHT before applying to obtain a grant on credit from HMRC.
HMRC have issued new guidance on applying for a grant on credit. PRs must write to HMRC:
- Confirming that they are unable to release funds from the estate.
- Stating the maximum amount of IHT they can pay.
- Outlining what steps will be taken to raise funds to pay IHT if HMRC agree to allow the grant on credit.
Where a grant on credit is agreed, HMRC will request that the PRs sign an undertaking to pay the IHT due within an agreed timescale.
Interest will be charged on IHT outstanding after the end of the sixth month after the date of death (the normal IHT due date).
Useful guides on this topic
At a glance: How to calculate Inheritance Tax
What is Inheritance Tax (IHT)? When is IHT charged? How do I calculate IHT on an individual's estate? What rate of IHT applies?
Probate: At a glance
When someone dies, it is often necessary to apply for probate. What is probate? When is probate needed? Who can apply for probate? What happens if someone dies without a will?
Trusts & Estates: What’s New 2024/25
HMRC's latest Trusts and Estates newsletter contains some useful information. Here is our enhanced version for subscribers, including reminders of recent and upcoming changes.
Estates: Income Tax and Capital Gains Tax
How do executors deal with income and capital gains arising on the deceased’s estate? What allowances and reliefs are available?
IHT: Estate planning checklist
This checklist covers some of the essential planning points that taxpayers should know when planning for their estate and Inheritance Tax (IHT).
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