Inheritance tax on UK inheritance

[GaryC]

And here is a link to all you need to know about paying https://www.gov.uk/paying-inheritance-tax. But remember the "you" here is not "you" as a beneficiary who has their own bank account but "you" as the Executor, who has a bank account for the purpose of administering the Estate.

Someone mentioned using your own money, i.e. you as a beneficiary or just a family member. I am not sure how that would even work from a legal perspective, though it is something I have in mind to research just in case it is of relevant within the family at some point...

[Escafusa]

You can’t defer payment, they insist on it before probate otherwise it becomes really hard for them to get the IHT money if it is distributed among lots of people who don’t want to give money away. Or so I gather.
It is clear from the government website that probate is not granted until IHT is paid, at least partly. I think the “partly” here gives room for manoeuvre.

Thank you for that post. Utterly shocking. I had no idea that probate being granted was dependent upon the tax being paid first (or at least in part as you say). I can understand the reasoning behind it. You're lucky the banks are paying out pre-probate. I still don't understand how other people pay it though. What if there is no liquid cash and only a series of properties in the estate? You can't sell them to pay the tax because you don't have probate, but they won't give you probate which would allow you to sell them to be able to pay the tax! Bonkers!

I'm actually hoping they abolish inheritance tax altogether in the UK. I think it's a disgrace that this tax even exists - most people have already paid their taxes on that money during their entire lives. There were some hopeful whispers in recent months of it being ditched, but alas it hasn't come to anything so far.

The tax is owed by the estate, not by the beneficiaries. It therefore doesn't matter where a beneficiary lives, because they are not the ones paying the tax.

Fine, but it is money that overall will be deducted from the amount you're inheriting, so to me this is still a big loss. It's bad enough losing the loved one, without being slapped with a huge tax bill. Talk about grave robbing!

[Auntie Helen]

So, an update.

Last weekend I went to the UK with all my completed UK Inheritance Tax forms. It was actually all fairly easy once I had a nice excel spreadsheet to calculate everything and to tell me what Box number to put everything in. I went through it all with my sister.

I didn't have all the figures I need (but would only get some of them after Probate anyway) so I filled in as much as I could as firm numbers and there will be some updated figures once probate is granted, and of course once the house is sold.

My sister and I signed everything and we paid the estimated inheritance tax (plus a bit extra on top in case) via bank transfer.

This is all so I can fill in the German one which I have to get to the Finanzamt before 01.05.

First problem... the ECB spot rate for the value on Mum's death date is the Euro rate to pounds (so 0.85353) - this is using the link Panda offered on page one of this thread. I of course need it the other way round (I need to convert pounds to Euros) but the ECB website only seems to do it from the Euro side, not the GBP side. Googling is not helping. Anyone else have a clue?

[Auntie Helen]

Filled in the whole form provisionally and realised this isn't all I need to do as nowhere does it say what inheritance tax I have had to pay.

So I have found Anlage Erwerber which I will need to fill in. Of course it asks for information which I don't have but I will do my best. We paid the IHT yesterday but won't get a receipt for it as that's not how HMRC works. I will have to send them a screenshot from my banking software (paperless account). Fortunately I got my sister to transfer me my portion out of the Executor Account (which is in only her name as NatWest wouldn't allow a non-UK person to be added) and so I was able to pay it from an account with my name at least.

So tomorrow when I have more energy I will tackle Anlage Erwerber. Fun times.

(The HMRC forms are written much more clearly with much more space to write things in, and colour coded nicely too).

[PandaMunich]

First problem... the ECB spot rate for the value on Mum's death date is the Euro rate to pounds (so 0.85353) - this is using the link Panda offered on page one of this thread. I of course need it the other way round (I need to convert pounds to Euros) but the ECB website only seems to do it from the Euro side, not the GBP side. Googling is not helping. Anyone else have a clue?

Divide your pound amount by that ECB exchange rate:

• 1,000 GBP / 0.85353 GBP/€
  = 1,171.60€

[PandaMunich]

So I have found Anlage Erwerber which I will need to fill in. Of course it asks for information which I don't have but I will do my best.

Anlage Erwerber is easy.

Fill in your personal details:

2024-04-09 19_18_29-Finanzamt.jpg (157.83 KiB) Viewed 2101 times

You will need to convert the UK inheritance tax amount into Euro using the exchange rate that was valid on the date of the death:

2024-04-09 18_48_30-Finanzamt.jpg (35.28 KiB) Viewed 2101 times

and on page 2, assuming that your mum did not give you any gifts within the last 10 years - normal gifts, e.g. birthday gifts do not "count": https://www.haufe.de/finance/haufe-fina ... 98887.html

2024-04-09 18_53_03-Finanzamt.jpg (55.86 KiB) Viewed 2101 times

We paid the IHT yesterday but won't get a receipt for it as that's not how HMRC works. I will have to send them a screenshot from my banking software (paperless account).

Send them a copy of your bank account statement.

[kiplette]

Utterly shocking...
I still don't understand how other people pay it though. What if there is no liquid cash and only a series of properties in the estate? You can't sell them to pay the tax because you don't have probate, but they won't give you probate which would allow you to sell them to be able to pay the tax! Bonkers!

Death/inheritance taxes have long been a literal disaster for families with grand estates because you can easily end up owing more than your liquid assets cover. By the time you've borrowed thousands/millions at injurious interest rates, the knell of doom has struck.

We had a lad working with us 20 years ago who was something like the fifth richest chap in the UK but he didn't have an enormous amount of immediately useful cash at all - he'd have had to sell his ancient ruined castle and a lot of quite bleak land to free up his assets, and the worth of those types of things is very much dependent on the market at the time.....

Inheritance tax is a way of recouping some money from the extremely rich and levelling the playing field a bit, given that money tends to generate money, and rich people can pay clever people to avoid taxes. The idea of it is fine, the way it plays out isn't always very sustainable, and the ripples can be felt far off....now property prices have gone through the roof, some relatively ordinary folk are caught in the net.

[Auntie Helen]

So with mega thanks to Panda I posted the German Inheritance tax forms to the NRW Finanzamt responsible (Krefeld) this morning, a nice fat envelope.

I filled in the main form as well as I could (some things don't match) and then I did the individual form for me and my husband did one for himself. I have paid more IHT in the UK than Germany are likely to require from me, my chap may have to pay a few hundred Euros. We still don't know the final value of the estate until Probate is granted so these were all estimated figures. I also sent the Finanzamt my nice Excel Spreadsheet with exchange rate on the date of death of my mother etc, and how we work out the percentages of who gets what. They also got a copy of the Inland Revenue's form IHT400 (the main inheritance tax form) as that is where most of the information is stored.

We will see if they come back to me for more information.

They might quibble about the fact that in the UK my sister and I have agreed to pay the inheritance tax out of our share of the estate (we get effectively 41,3% each in total, depending on the final sale value of the house) and the rest of the estate is shared amongst my nieces, husband and sister's husband with differing percentages without IHT. My sis and I decided to pay all the tax from our "shares" (well, technically from the estate, but we will remove that value from our distribution when it eventually happens), but one could theoretically say that I should not have paid 50% of the IHT in the UK and the German Finanzamt might want to know about that. I will cross that bridge if they ask about it.

[T-Bone]

...
If you are paying inheritance tax in the UK (and you don't know that yet) then you don't want to pay it elsewhere as well surely?

I definitely would not declare any of this in Germany as you could be tied up in paperwork for a couple of years! Even if you want to, you can't give any figures to Germany at this stage in any case as you have no idea of the exact amount you are actually inheriting - you don't know how much the house will sell for. You also don't know how much of the other money will be left after solicitors' fees, funeral expenses, other legacies are paid - it's a complicated process, especially if the estate is a substantial one.

...
I'm also a resident of Germany and inherited (house and money), but I haven't notified anyone over here, apart from the fact, for me at least, it is a private and solely-UK matter, I wouldn't want the hassle, paperwork and possible taxes and fees involved over here. The money went into a UK account and the house is still in my grandfather's name and I'm not selling, so I don't see any issues - but then that's just me!

You're required to disclose to the inheritance tax office in Germany within three months of learning of your inheritance. That consists of writing them a letter, where you explain the circumstances, and the values of what you'll inherit, to the extent you know them. Then they will decide whether and when to require you to submit an inheritance tax return, and/or pay something in advance. My experience (in Berlin) is that they're quite lenient in allowing time for the estate to be settled, possibly years, if the situation is unclear. I've heard that if you miss the three-month deadline, they may overlook it, as long as you do it reasonably soon. But simply not notifying them ever, if you owe tax, is criminal tax evasion.

[alma.freya]

...
If you are paying inheritance tax in the UK (and you don't know that yet) then you don't want to pay it elsewhere as well surely?

I definitely would not declare any of this in Germany as you could be tied up in paperwork for a couple of years! Even if you want to, you can't give any figures to Germany at this stage in any case as you have no idea of the exact amount you are actually inheriting - you don't know how much the house will sell for. You also don't know how much of the other money will be left after solicitors' fees, funeral expenses, other legacies are paid - it's a complicated process, especially if the estate is a substantial one.

...
I'm also a resident of Germany and inherited (house and money), but I haven't notified anyone over here, apart from the fact, for me at least, it is a private and solely-UK matter, I wouldn't want the hassle, paperwork and possible taxes and fees involved over here. The money went into a UK account and the house is still in my grandfather's name and I'm not selling, so I don't see any issues - but then that's just me!

You're required to disclose to the inheritance tax office in Germany within three months of learning of your inheritance. That consists of writing them a letter, where you explain the circumstances, and the values of what you'll inherit, to the extent you know them. Then they will decide whether and when to require you to submit an inheritance tax return, and/or pay something in advance. My experience (in Berlin) is that they're quite lenient in allowing time for the estate to be settled, possibly years, if the situation is unclear. I've heard that if you miss the three-month deadline, they may overlook it, as long as you do it reasonably soon. But simply not notifying them ever, if you owe tax, is criminal tax evasion.

This isn't the first time the user you are replying has suggested tax evasion. They haven't been back since their 2 weeks ban for unrelated offences.

Regarding your comment about informing the tax office: I inherited xx,xxx GBP in 2019 but it didn't even occur to me that inheritance tax might be due in Germany. I did some research in 2022 after again inheriting some money and when I realised inheritance tax was also due in Germany I informed them about both inheritances (via a Steuerberater). There was no fine from the finanzamt and I paid the necessary taxes. I suspect because I was pro-active (ish) in telling them, they opted not to include a fine.

[Auntie Helen]

It would never occur to me not to tell the Finanzamt about my inheritance if it is something they have a right to know about/tax. After all, I can't complain about public services if I am not paying my fair share.

I will be interested to see if the UK Inland Revenue or the German Finanzamt are quicker at processing my paperwork. The UK had more pages and a more complicated form (because of my other relatives who were also inheriting), the German form had lots of gaps where their questions can't be answered for an English inheritance. We'll see who writes back first!

[snowingagain]

I had an accountant do it. He did a calculation of what I would have have received if no estate tax had been paid. This sounds simpler than it is, with multiple people benefitting from the will (some tax free/ some reduced/ some taxed). I was receiving a portion that was remaining. It was not a simple okay you inherited x with a tax free allowance of y. Just not.

[sam]

Death/inheritance taxes have long been a literal disaster for families with grand estates because you can easily end up owing more than your liquid assets cover.

This is how the National Trust came to own all those stately homes. Some with sitting family "grand family" tenants.

[kiplette]

Hopefully a very quick question - last year Paps was kindly left 300 quid by his Godfather in the UK.

He is trying to put it on Elster.

I said I was pretty sure no-one is wanting to tax it. Amirite?

[PandaMunich]

last year Paps was kindly left 300 quid by his Godfather in the UK.

He is trying to put it on Elster.

I said I was pretty sure no-one is wanting to tax it. Amirite?

Yes, you're right.
German gift tax would only be due if your husband had received in total more than 20,000€ from his Godfather within the last 10 years.

[kiplette]

Thank you!

I think we might be finished with Elster already Woohoo!!

[Auntie Helen]

I will be interested to see if the UK Inland Revenue or the German Finanzamt are quicker at processing my paperwork. The UK had more pages and a more complicated form (because of my other relatives who were also inheriting), the German form had lots of gaps where their questions can't be answered for an English inheritance. We'll see who writes back first!

Quoting myself. The answer is, the UK authorities were way quicker - we got grant of probate in early July (Mum died on 1 Feb) and are just awaiting the final payment from one of Mum’s investments (hint: never ever go with Aegon, they have been hopeless and slow and constantly requiring more documentation).

Haven’t heard a peep from the German tax office although I sent their paperwork off before the UK one.

I will be deregistering from Germany at the end of December and will live part time in Mum’s house (still not sold) with regular visits to Germany whilst we await my husband’s spouse visa (we will be applying for it in February as he is working in DE till the end of May). We have to sell our German cars and buy a British one, rent somewhere (we will not be living long term in Mum’s house that we are selling, but in a town 45 minutes away). I am deregistering as I am finishing work in December (resigning, the company knows about this and we discussed together the best time to do it) and I don’t want to pay the whopping German health insurance once I am unemployed.

[yesterday]

Cool