When it comes to inheritance tax (IHT) in the UK, there are finance solutions on paying it off and bridging finance is one of the options to use.
This article is going to talk about how to use a bridging loan to pay for inheritance tax along with explaining what they are and why you might need one to help you out.
What Is A Bridging Loan and Inheritance Tax?
You may have heard the term bridging finance before but not fully understand their uses for different situations, and inheritance tax is one of those.
- Bridging finance is a short-term loan that is taken out for a period of between 2 weeks to up to 18 months. This bridging finance tool helps people to put a ‘bridge’ between debt and financial solution.
- Inheritance tax is a common thing that most people will come across at some point in their lives. This is the tax that is paid by a person who has inherited money or property from someone who has passed away. This may be something that comes as a shock to people, and therefore, they may not be financially prepared to pay this inheritance tax. That is where the bridging finance tool comes in to help.
How Much Is Inheritance Tax?
These figures are based off paying inheritance tax in the UK:
- The deceased estate must pay 40% on everything that is above £325,000. This is based on one person, and therefore the allowance would be double the amount for a married couple.
Inheritance tax may be something that you aren’t aware of, so when it comes to someone passing away, it might come as quite a shock to you that this needs to be paid.
As you might not be prepared and have the money ready to pay, bridging finance is the perfect solution to help you out.
Can I Get A Bridging Loan To Pay Inheritance Tax?
Bridging finance can be used in different situations, and it acts as a great solution if you find that you may be struggling financially.
When you have a loss of a friend or family, it can be a challenging and upsetting time anyway, so the added stress of having to think about paying the inheritance tax is something you don’t want to have to deal with.
This is where a bridging loan comes in to help you out and below explains to you the process of how you can use a bridging loan to pay inheritance tax:
- Bridging finance is a short-term loan, where you can borrow money, to pay off the tax owed.
- By using a bridging loan, you take away the extra stress of trying to find the money there and then and can instead, take out a loan that can be paid back in as little as two weeks.
- You would need to go to a bridging finance lender to explain your situation and discuss how much you require. You may need to go through an approval stage where they will ask you questions to see if you qualify for the short-term loan.
- Once approved, you will then receive the money which can be used to pay off the inheritance tax straight away.
If you find that you are struggling to find the money to pay off all the inheritance tax, then bridging finance is an excellent solution for something short-term.
How do I Use A Bridging Loan To Pay Inheritance Tax?
- You will first need to find a lender that will give you the short-term loan and discuss with them how much you need. They may need to assess you to make sure you qualify for the loan, before giving it out.
- You will need security to borrow the money, in most cases a property, but not the inherited property as you do not own it yet.
- Once you’ve been approved, you will receive the money in approximately 7-10 days.
- This money can then be used to pay off the inheritance tax straight away, so you no longer worry about paying that off.
- Then all you need to do is pay back the loan, which would’ve been agreed with the lender on how much would be paid at a time and the time scale to pay it all back.
Bridging finance is a straightforward process, you need to find the right lender that will help you out, and you’re good to go.
It is worth noting that you cannot use the inherited asset as security against the loan, as you do not own it yet.
Why Use A Bridging Loan For Inheritance Tax?
With paying inheritance tax, it may cause a bit of heated situation between families as it can affect the assets that were left to them. Bridging finance is a great and quick way to pay the tax back to avoid problems with the following:
- Retaining ownership of the family home-
It may be that it has split between multiple siblings, and in the case of a family home, one might want to move in and buy the other siblings out.
- Shares in the family business-
There may be a family business that a beneficiary might want to be involved in with the running and shares of the company.
- Need for early payment-
There may be a need that one of the beneficiaries require the money from the assets sooner and therefore, may push for them to be sold at a lower price than market value.
By paying off the inheritance tax sooner, things like this can get avoided, and it helps to take the extra stress and hassle away from the situation.
If you come into the situation that you find yourself needing to pay inheritance tax, then a bridging finance solution is an excellent option to consider.
A loss in the family can be a challenging and emotional time to deal with anyway, without the added stress and emotions of needing to find money to pay the tax. Bridging finance is a great, quick and straightforward way to pay something off and only have a loan for a short period.
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