Bridging loan to pay inheritance tax: can you use specialist finance to pay HMRC?

Yes, investors can use a bridging loan to pay inheritance tax. Of course, every bridging loan and case we deal with will be different. Our funding is bespoke, with loans tailored to individual circumstances.

But, generally, it’s possible to use a bridging loan for inheritance tax, capital gains tax (CGT), VAT, and other levies providing the loan itself is secured on property. This may prove crucial for some people, given how tricky the probate system can be[1].

Sometimes, an inheritance tax bill could end up due before an estate is received by inheritors. This means that beneficiaries of an estate may need to cover a large tax bill for substantial assets they’re yet to own.

As such, short term, quick specialist finance can help cover what’s owed while long term solutions are found. And given how much inheritance tax may cost people, it’s probably worth having contingency plans in place.

Why do people need inheritance tax bridging loans?

It’s no wonder that people are considering using bridging loans to pay inheritance tax bills, given the changes we’ve seen in the tax system in recent years. In 2018, it took, on average, seven to ten working days to get a grant of probate. Now, it’s taking more than 30 weeks according to Law Society. The government itself says it should take no longer than 16 weeks[2].

This may not have proven much of an issue on the high street in prior years. Banks used to provide probate or executor loans to cover inheritance tax costs where delays occurred, but these products have all but disappeared[3]. Some may have no choice but to turn to specialist lenders for bridging loans for inheritance tax.

This may prove especially true over the coming months as inheritance tax becomes more common place. In its simplest definition, inheritance tax is a tax levied on the estate (property, money, possessions etc) of someone who’s died[4]. It’s only paid on estates valued over certain thresholds and currently, only around 4%[5] of families have to pay it.

But, the government is collecting record amounts from inheritance tax[6], and more people are expected to be hit by the levy as thresholds sit frozen[7]. What’s more, HMRC is focusing its resources on hunting down families who haven’t paid enough inheritance tax[8].

Indeed, many people are being caught unawares. Over 13,000 wealthy families faced surprise inheritance tax bills as high as £1.4mn in the 2020/21 tax year according to the Financial Times[9], despite specifically making efforts to avoid the tax.

Generally, inheritance tax bills end up being very expensive where they are levied. In 2021, the average inheritance tax bill was £214,000. It’s estimated to rise to £239,000 this year[10].

A bridging loan to pay inheritance tax may be a necessity to some who don’t have a spare £200k lying around that can be deployed asap. But, covering an inheritance tax bill is not the only way in which specialist finance can help.

How else may bridging loans help with inheritance tax?

Inheritance tax is a complicated levy, one in which investors should seek professional advice from qualified experts. Also, we are not investment or wealth advisors. We will never advise our borrowers on how they should invest, or in what assets they should place their capital.

But, by investing in certain property types or business assets, investors may be able to benefit from inheritance tax reliefs[11]. Business relief[12], for example, can provide relief of up to 100% on some of an estate’s business assets. This can include property and buildings, unlisted shares, and machinery.

Also, agricultural relief[13] can allow qualifying people to pass on some agricultural property completely free of inheritance tax. Agricultural property that qualifies for this relief includes land or pasture that is used to grow crops, or rear animals. It also includes farm buildings, farm cottages, farmhouses, and more.

Our bridging loans can be used for a broad range of property types, business plans, and circumstances. We offer funding for both residential, and commercial investments and so long as an investor’s plans fit in with our remit, and there is a solid exit strategy at play, we may be able to find a way forward.

What else can specialist finance assist with?

Using a bridging loan to pay inheritance tax isn’t the only way in which specialist finance can help investors outside of purchases. Our products can be used to help with a broad range of circumstances and costs, including:

• Broken chains
• Gifted deposits
• Probate/executors
• Tax and other liabilities
• Capital Gains Tax (CGT), VAT
• Divorce settlements
• Defaults
• Annulment of bankruptcy
• Discharging adverse credit
• Exiting Individual Voluntary Arrangements (IVAs)
• Repairing County Court Judgements (CCJs)
• Missed mortgage payments

Inheritance tax itself can also be varied by a person’s (or entity’s) setup, which can also add complication. But, we’re able to accommodate many different types of applicants. This includes individuals, various types of companies, trusts, foreign nationals, and more.

We cannot give tax advice. If investors want to lower their tax bill, they’ll need to work with accountants and tax experts. But, once they’ve figured out the right strategy for their circumstances, we’ll be there to provide specialised finance that’s underwritten from day one, and adapts to the needs of the market.