IHT Calculations involving bonds

Hi all,

I'm trying to get my head around how to calculate the potential IHT for a client. I'm looking at this purely from a tax point of view and not a planning point of view.

They have around £4m of assets, of which £1m are held in various onshore and offshore bonds. The bonds have significant gains built in which if fully surrendered today, would push into additional rate tax bands.

The client is the last remaining life assured on the bonds and so these will surrender on death and as they are not in trust, will enter the estate.

As far as the IHT position calculation, am I right in thinking that the bonds are considered "surrendered" the day before the death of the client? Does this then mean that the income tax due is considered a debt on the estate, and therefore reduces the net estate for IHT purposes? If so, you would then work out the net position after income tax due?

Or is the pre-surrender value what is considered when calculating the IHT position?

Many thanks


  • Investment Bonds are reported on IHT 410. You add the amount received by the estate (or rather the amount that would be received by the estate once probate is granted) i.e the surrender value.

    In the IHT400, you deal with estate debts, including any income tax liability the deceased is liable for arising from the completion of an income tax return / self-assessment for the tax year in which the deceased died (box 82). Equally, if such a calculation results in an income tax refund, this is included as an amount owed to the estate on the IHT 400, box 74.

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