Will i have to declare the Tax on this?

Question

Sadly I lost a member of my family recently. After everything settled down I found that I will be due both the death in service benefit and life insurance. My fear is that once both these amounts enter my account that the tax man will start knocking on my door. Is this true? Thank you.

Answer 1

before you get any money the taxman will have had his extortionate share so you will be left with the pittance unfortunately.

Answer 2

Commiserations on your loss.

The death in service benefit and life insurance should have been declared on the IHT205 or IHT200 form completed by the executors (or the solicitors handling the estate, if you used them), and any Inheritance Tax due (on an estate of over around £300,000) has to have been paid before Probate can be granted and the estate can be distributed to the beneficiaries. If everything has been done properly, there will be no further tax to pay, but if this money only became apparent after Probate was granted, then you must let Revenue & Customs know so that figures can be adjusted.

(This advice applies to England & Wales - Scotland may be slightly different).

Answer 3

Far better to declare it. The tax man will either include or exclude. You really don't have a choice as, trust me, when they find out the penalties are severe.

Answer 4

No tax will be due on the actual amounts you recieve as any tax will have been settled before the funds are distributed, You will have to pay tax though on any interest that the amounts attract through investment.

Answer 5

Inheritance tax starts at £312,000. I think it's taken out of the estate before you get any money though.

Answer 6

in some cases yes but in others no it depends on the ammount