I understand that inheritance of less than (about) £260000 is free from inheritance tax, but if I inherited this amount then would I have to pay income tax, or any other significant tax?
...or does nil inheritance tax mean that it is totally tax free?
Thanks
David Bevan
Your capital sum is free of taxes but you would have to pay tax on any interest you subsequently earn Posting from Peter Rogers
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First be aware that this doesn't mean *you can inherit* this much tax free (unless you are the only heir). The limit (which for deaths in 2005/06 is £275k) applies not to each heir but to the whole estate of the deceased (including any major gifts made during the 7 years prior to death).
For example if there is one other heir apart from you, and if the will (if any, or intestacy provisions otherwise) provide(s) that each of you will get half of (what's left after taxing) the total estate of £550k, and there are no 7-year gift complicatios, then the estate pays no IHT on the first £275k but 40% of the second £275k. There'd be £440k left and you'd each get half of that.
Note that IHT is paid by the estate, not by the heir(s).
No. But if you stick it in a savings account, you'll obviously pay income tax on the interest accruing from after date of death.
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