How much tax on inheritance for UK?

loveisdivine

Hi,

I'm just trying to get this clear in my head and could use some clarification.

Husbands uncle who was resident in the UK passed away. His estate is being split between the relevant beneficiaries.

Got a letter from the solicitor over there that after all their fee's +VAT we are due about £53k.

By my (admittedly unsure) calculations I make the CAT payable here at about €8745.

I know there is double taxation relief, and I would assume the tax paid on the estate in the UK would be greater than the €8745 due here.

Do we pay the tax here and then get a refund of the tax once we provide evidence of the tax paid in the UK?

If any could tell me if I'm on the right track that would be great. I got a bit confused with the revenue site because it kept referring to property and we aren't inheriting any property, just money.

nompere

The UK taxes estates, and an estate worth less than about £400,000 isn't subject to any inheritance tax. So it's quite likely that the Irish tax will be more than the UK tax. The solicitor will be able to give you a calculation of the tax you will have paid. Do be aware that the figure he has given you will be net of any tax so the gross inheritance might be higher.

You can include the UK tax as a credit in the IT38. At some stage Irish Revenue might ask for evidence of the UK tax.

"Property" in tax terms covers just about everything. Land and buildings, which you think of as "property" are usually called "real property" .

loveisdivine

Thanks.

I've had a look at the documents myself now.

The gross estate is £606k

It then says after administration expenses the "cash sum available" is £591k

Our share of he capital is £65672.

It doesn't mention anything about any sort of inheritance tax paid at all.

I might just have to pop him an email and ask if the tax has already been paid and how much it was. If they can tell me that.

As the inheritance tax in the U.K. Is paid on the whole sum, would we only get a credit for the amount paid in respect to our portion? Obviously we don't get a credit for more than the tax, but say the overall tax paid was 100k, then obviously no additional Irish tax would be due, but if they only consider the tax paid on our portion, say 10k, then there could still be Irish tax due.

To be honest it doesn't really matter, its free money that we weren't expecting. I imagine we will still end up with close to 50k in our pockets!

It's just good to have things relatively clear in your mind. And of course nobody wants to pay more tax than they need to!

Lockedout2

There is a different method of charging inheritance tax in the U.K.

They in effect say that the last person in the list pays the tax known as the residual legatee. So if the will says A gets £100k and B gets £50k and C gets the balance C is deemed to have paid the tax.

A & B don't get any credits as they in effect have not paid tax.

So the question is does the OP get a specific bequest or a share of the residue?

loveisdivine

Not sure if this is what you mean but we weren't left a specific amount. He had no will, there's 6 people and it's being shared between the 6.

The deceased's sister is getting nearly 200, then 2 other relatives are getting about 100 and then my husband and his 2 brothers are getting the 66k each.

nompere

loveisdivine wrote: »

Not sure if this is what you mean but we weren't left a specific amount. He had no will, there's 6 people and it's being shared between the 6.

The deceased's sister is getting nearly 200, then 2 other relatives are getting about 100 and then my husband and his 2 brothers are getting the 66k each.

On a UK estate of about €600,000 the tax will be in the region of £110,000. (The nil rate band is £325,000 and the rest gets taxed at 40%.)

So your 1/9th comes to £66,000 (close to what you said this morning) and after tax of 1/9th of £110,000 (about £12,000) your share becomes about €54,000 - which is close to your 1st post here.

So in Irish terms the inheritance is the Euro equivalent of €66,000 and you get a credit for UK tax of the Euro equivalent of £12,000. If that analysis is correct then there shouldn't be any Irish tax to pay.

Lockedout2

I assume that the deceased had 3 brothers or sisters and that the estate is being distributed to one surviving sister and the children of the other two deceased siblings and is not a family arrangement.

Good summary by Nompere.

loveisdivine

Lockedout that is correct.

Thank you nompere that's was really clear and helpful.

Just one last question on the tax credit. Will we actually get the money back as a refund at the end of the tax year? My husband only works part time so pays little to no income tax anyway.

Lockedout2

It's double taxation relief and reduces the amount of Irish tax due to zero.

There is no refund of Capital ACquisitons Tax. It's not Income Tax.

loveisdivine

So we don't pay anything at all? Just declare it and because it comes to zero due, we don't have to do anything else?

Sorry, I thought we had to pay it initially and then it would be refunded.

nompere

You claim the credit on the form IT38 that you file. If the UK credit is higher than the Irish tax then there's nothing to pay. You can't get the excess back, though.

You only have to pay something if the Irish tax liability is higher than the UK credit - and even then it's only the difference.

loveisdivine

That's brilliant. Thank you again so much.

loveisdivine

Back again!

We asked the solicitor in the UK for confirmation of tax paid in the UK and apparently no tax has been paid on the estate in the UK because of something called "Spouse Transferable Nil Rate Band".

So it would seem tax is due here and there will be no credit to claim as nothing has been paid in the UK.

I think it works out at around €9075 to be paid as my husband gets a threshold of 32500 for being a nephew of the deceased.