I have been left £5000 in a great aunts will I have been told this will be paid less 30% tax. Do I really have to pay tax on this legacy?

[dragonsfairy]

I have been left £5000 in a great aunts willo. I have been told I willhave to pay 30% tax on this. I do not work and therefore do not use my tax allowance. Is this 30% tax correct?

[dzug2]

It's not connected with your tax allowance at all - it looks as though the will has been worded so that beneficiaries meet their share of the Inheritance tax paid by the estate. Slightly unusual but not unknown.

Without seeing the wording of the will and the accounts of the estate there's no way of telling if it is actually correct

The tax will be deducted before you receive the bequest BTW

[factor-fiction]

Yes the estate pays the tax , not you, but as you get a share of the estae after tax you may get less than £5000. I'm assuming that you are in the UK

[sunny-dave]

Inheritance tax is levied on the total value of the estate.

The first £325,000 is zero rated (as are any charitable donations) and then the rest is taxed at 40%.

If the will is written so that all legatees pay their share then it must mean (in your case) that the overal estate is around £2million - with tax of around £670,000 due. This would then equate to approximately 30% of every bequest.

If the estate is much less than £2million then someone is doing some odd/dubious smoke and mirrors by charging you 30%.

[factor-fiction]

If it was a solicitor who told you then I would ask for clarification, but I think the 30% figure is probably just a simple misunderstanding
If it was bloke at the pub just ignore him

[ubasses]

Depends on wording of the Will but usually tax is paid on the Estate and then the benieficiaries receive what they have been left tax free. It may be that your Great Aunt has bequeathed more than is left after Tax and the Executors have decided that the fairest way to distribute the estate is to give everyone what they have been left minus the tax on their share.

[sunny-dave]

Ah yes factor30 - I'd forgotten the 'bloke in the pub' scenario :+)

[VHG]

>>>The first £325,000 is zero rated (as are any charitable donations) and then the rest is taxed at 40%.

Not necessarily £325,000

If a husband or wife dies and does not use any of their inheritance tax allowance then their amount is added to the second persons inheritance tax allowance.

So it could be double that tax free, £650,000

[Barmaid]

Get a copy of the will dragonsfairy. You can get one from the probate registry. With the will you will also get a copy of the Grant which will tell you the approximate net value of the estate.

Also can you get whoever told you this to confirm which tax? Are you and was your aunt both domiciled in the UK?

[factor-fiction]

Correct ansteyg, but if after the tax (and debts) has been paid from the estate there isn't enough left to pay the legacies in full then the legacies would have to be scaled down

[Barmaid]

Ansteyg - technically you are correct since the tax is levied on the estate. However, if gifts are expressed to be bearing their own tax, the legatee receives their gift net of tax.

The starting point MUST be the Will. It depends on so many factors, whether the gift is a set amount of money or a share of residue, whether there are exempt/non exempt beneficiaries, whether there is something called a "benham" clause. Impossible to say without sight of the Will.

[factor-fiction]

Does this fully answer your question, dragonsfairy?

[Craftypig]

Still £3500 is a nice little touch, surely?

[dzug2]

Hmmm

Someone on MSE has asked exactly the same question but has added a vital fact - that the inheritance is from the Republic of Ireland, where the tax IS paid by the recipient, subject to allowances and small print

Whether it's the same person or not is difficult to tell - but it would be a mighty big coincidence if it were not.

Unless the GA has multiple great nieces....

[starone]

What's MSE dzug? - Just idle curiosity.

[dzug2]

Money saving expert

http://forums.moneysavingexpert.com/

[starone]

Thanks dzug. I have this every week but did not recognise the abbreviation.

[factor-fiction]

From an earlier post dragonsfairy was living in th north of England but of course that doesn't mean the Great Aunt wasn't living in Eire.
We really need dragonsfairy to come back and clarify things

[dragonsfairy]

Yep I did live in the north of england, well done that detective, lol, I was actually asking the question sort of on behalf of my daughter in law, who must have posed the same q on sme. and I did forget the point that the aunt lived in Eire. Thanks to everyone who answered for me.