Inheritance Tax

The UK Inheritance Tax is a significant bill for an estate’s executors. Meeting this quickly and easily is a task that bridging finance is ideally suited for.


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Passing wealth down through the generations is a top priority for many of the UK’s citizens, and a major challenge to this is the Inheritance Tax that is due when an individual passes away. The executors of an estate must act quickly to ensure that the tax is paid within the allotted timeframe, and may find it difficult to do so; in these situations, bridging finance can be an invaluable solution that enables a family to retain cherished possessions and assets.

As with all financial products a bridging loan for inheritance tax must be repaid (with interest); if the loan is not repaid in full, the assets against which the loan is secured may be repossessed instead. While a bridging loan may well be the solution to many issues that confront an estate’s executors it’s important to consult a financial advisor before committing to this form of finance.

When Is A Bridging Loan Necessary For Inheritance Tax Finance?

Bridging finance is ideally suited to meet the needs of an inheritance tax bill because it is a highly flexible and adaptable form of finance. Before considering how it can help, we must first examine the requirements that inheritance tax places on individuals, which will highlight how helpful bridging finance can be.

UK Inheritance Tax is levied on the value of an estate over £325,000 (rising to £425,000 if your home is passed to your children). This means that any estate worth more than this will be charged at a rate of 40%, levied on the value above the threshold. This can result in a hefty bill, even for estates which would not be considered particularly high-value: for instance, a house with a value of £350,000, two cars of £10,000 each and £30,000 in savings would total £400,000, requiring a tax bill of £30,000. This is not a huge estate, and would be typical of many middle-class retirees; for higher-value estates, tax bills can grow extremely large. For example, if an estate consists of an £800,000 home plus another £100,000 in assets, inheritance tax will present a whopping bill of £230,000.

The main pressure that this puts on large estates is the need to liquidate assets. While a smaller estate may be able to produce the £30,000 necessary to meet the tax bill without selling off a property, it’s very difficult for even a rich family to raise £230,000 in capital within the 6 months required by the UK Government. In many cases, the only way to acquire this amount of cash is to sell off family assets, usually by putting the house up for sale.

How Does A Bridging Loan Help To Pay Inheritance Tax?

The high value of some inheritance tax bills can require an estate to be liquidated quickly. Unfortunately, this can sometimes necessitate the selling-off of assets at less than market value; if a home has to be sold in a short space of time, sellers often have to compromise by accepting a low bid. As anyone who’s sold a house will know, 6 months is not necessarily long enough to reliably complete a sale, and if the transaction should fall through at any point then there’s no way to pay off the inheritance tax.

Bridging finance provides valuable options to an estate’s executors, because it can be used to create a little breathing room while long-term finances are arranged. A bridging loan is commonly used to create a financial “bridge” between the payment of a debt and the long-term financial solution which would usually be used to pay it. In this case bridging finance may be used to quickly resolve an inheritance tax bill whilst the arrangement of an estate is completed.

Bridging finance allows an estate’s executors a great deal of flexibility in how they pay off their inheritance tax bill, because it provides them with the option to finance this tax without immediately selling off any assets. For instance, a bridging loan could be secured on the estate immediately for the purposes of resolving inheritance taxes, and the estate could then be sold off without the pressures of needing a quick sale. Alternatively it might be possible for the executors to source funds from long-term savings such as bonds, or the sale of stocks and shares. Using a bridging loan to temporarily cover the gap while these finances are put in place allows the executors to avoid dismantling an estate simply to meet inheritance bills.

Securing A Bridging Loan

Bridging loans are high-value, short-term loans secured against an asset through either a first or second charge. This makes them highly flexible and ideally suited to resolving inheritance tax issues because they may be arranged quickly and easily, and secured against a wide variety of different assets. When resolving an estate there are many different assets which might be used as security deposits for a bridging loan, which gives executors the flexibility they need to pay off the various necessary bills involved.

Although most bridging lenders prefer to receive “first charge” security on their loans, some lenders will also accept assets that have already been financed. Known as a “second charge”, assets which are already subject to finance may include houses under mortgage or cars purchased under lease agreements. The ability to use these assets as collateral is highly valuable when resolving an estate, because the many different claims must all be resolved; by consolidating these costs with the use of bridging finance, executors can quickly streamline an estate’s resolution.

By using bridging finance, it’s possible for executors to make the process of arranging an estate quick and straightforward, and to minimise the impact this has on their legacy. Because bridging finance can play such a useful role in meeting inheritance tax bills, it should be considered as an option whenever an inheritance tax bill must be met.

Common Uses Of Bridging Finance

  • Overview

    Bridging loans are short-term financial solutions which are typically found in real estate and a common use is to purchase a property before a mortgage can be put in place.

  • 1st Charge Bridging Loans

    Bridging loans are a flexible form of finance that can be put to many uses; in this article we discuss the application of 1st charge bridging loans and finance

  • 2nd Charge Bridging Loans

    Bridging loans are a highly flexible form of finance, and we discuss why the ability to secure a 2nd charge on a single asset can be invaluable for borrowers

  • Bridging Refinance

    The flexibility and speed of bridging finance makes it ideally-suited to refinancing existing loan products, and helps real estate owners maximise earnings

  • Buying Before Selling

    Buying before selling enables homeowners to break free of their property chains, and can often be achieved with the help of bridging finance.

  • Chain Breaking Finance

    Breaking free of the property chain is crucial for many buyers, and bridging finance is often an ideal way to jump-start a property purchase

  • Discounted Purchase Finance

    Bridging loans can be used to enable the purchase of property at a discounted price, where speed and flexibility makes them an ideal choice for property developers

  • Divorce Finance

    Though it is never pretty, divorce is sometimes simply a fact of life. Bridging finance helps divorces resolve quickly and smoothly with the minimum disruption.

  • Fast Property Purchase

    Completing a property purchase quickly can be highly valuable to many buyers, and bridging loans can offer the ideal solution for a quick purchase

  • Freehold & Lease Extension Bridging

    Purchasing a lease extension or freehold to maintain property’s value is often the right choice for owners, and bridging loans enable fast leasehold extensions

  • High Value Property Bridging

    High value property is a highly competitive sector of the UK real estate market, and requires specialist bridging lenders to provide bespoke financial solutions

  • Hotel Finance

    Bridging loans are an excellent form of finance well-suited to the needs of hotels and hoteliers, and flexible funding solutions can be sought for many requirements

  • Inheritance Tax

    The UK Inheritance Tax is a significant bill for an estate’s executors. Meeting this quickly and easily is a task that bridging finance is ideally suited for.

  • Non-Status Bridging Loans

    Non-status bridging loans enable investors to develop their portfolios without the restrictions of affordability assessments, and are a powerful form of lending

  • Personal Bridging Loans

    Personal bridging loans are one of the most flexible financial products there are, and bridging lenders are able to meet the varying needs of their clients.

  • Property Downsizing

    Downsizing can be a smart move for many property owners, and a stable form of finance such as a bridging loan is needed to provide flexibility and security

  • Quick Purchase Bridging Finance

    Moving quickly can often be make-or-break for a deal, and it’s important that professionals are able to access fast-moving sources of finance.

  • Regulated Bridging

    High value property is a highly competitive sector of the UK real estate market, and requires specialist bridging lenders to provide bespoke financial solutions

  • VAT Bridging Finance

    VAT bills add a hefty charge on to property purchases, and developers must use VAT bridging loans in order to minimise their impact on a project’s profitability

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