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Allocating the burden of IHT

Produced by a Tolley Trusts and Inheritance Tax expert
Trusts and Inheritance Tax
Guidance

Allocating the burden of IHT

Produced by a Tolley Trusts and Inheritance Tax expert
Trusts and Inheritance Tax
Guidance
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Who bears the tax?

The basic premise of inheritance tax (IHT) is that it is a tax on a transfer of value calculated with reference to the transferor’s status. Tax on death is calculated as a total charge as if the deceased made a transfer of value of the whole of his estate.

It is therefore a tax on the deceased but it is effectively borne by the beneficiaries of his estate: the value of their inheritance can be reduced by the tax on it. In a situation where the estate is distributed among a number of people, the question arises as to how to share the tax between them. This affects what they receive, and, in turn, what they receive may have an effect on the tax liability if they enjoy an exempt status.

There is a distinction to be drawn between incidence of tax and liability. Incidence refers to who, ultimately, bears the burden of tax and the proportions in which it is shared out. Liability refers to who

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  • 22 Nov 2022 07:18

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