ok, i spoke to mil last night and she said this was a pension that was then held by trustees for the 4 children, there's been a bit of a complication tho, as his dad married a Thai woman a couple of years ago, and lived in Thailand until his death a few weeks ago, well apparently she's after a share of this money, don't know what's going to happen now tho, i'd have thought 3 houses and a new car would've been enough for her but evidently not....

i'm still none the wiser really, spoke to mil yesterday and she said the trustees have both agreed that the 4 children are the beneficiaries, they've got to send paperwork off to AXA who will then release payment, and the solicitor (one of the trustees) now has all our addresses ready to send the cheques off to us...will have to see what happens then regarding tax

IF this had been a straight forward 'inheritance' to your husband on his fathers death there would be no tax to pay at all on £11,000. Inheritance tax only kicks in for estates over £300K. Dependant on the 'terms and instructions' of the trust and your incomes as to any tax liabilities. You should really try and get hold of all of the relevant facts and figures and then together with your husband, go and speak directly to your local tax office. They are usually very helpful and their advice/information is free.

Good luck.

It may not be inheritance tax that is being charged.

It sounds like the father set up a Discretionary or Accumulation and Maintenance Trust for his son (and possibly other beneficiaries) which has been running for 12 years. If this is the case then the Trust will be paying tax on its income at whatever rate is applicable for that particular type of Trust. The HMRC website seems to suggest that if the investment income is above £1,000 a year for the whole Trust (not just this beneficiaries bit) the rate on dividends will be 32.5% and on other income (rent, bank interest etc) 40%.

The HMRC website also states that distributions (ie payments to beneficiaries) will be deemed to have suffered tax at 40% so if the beneficiary is not a higher rate tax payer they should be able to claim some of the tax back. Higher rate tax doesn't kick in until an individual earns over £40,000 a year (assuming they get a normal personal allowance ie. no company car or benefits) - remember this is the income of the person benefiting from the Trust distribution not teh income of the family unit. The reclaim is the same principle as reclaiming tax suffered at source on bank interest if you don't earn enough to pay tax.

Anything to do with Trusts is complex so I'd suggest you have a meeting with the Accountant and get him to explain things to you fully. He will probably charge you for his time but it should be worth it in the long run as then you'll be sure you've claimed the maximum amount back.

Inheritance tax is at the flat rates of nil for the first £300k (or so) of an estate then at 40% for the balance. This is reduced for gifts that have ben made some years ago so yes, if the gift was made more than 7 years ago (and if it really was a gift rather than just a promise that the money would be passed on on death) then there should be no IHT to pay. The allowance has changed over the years and recently was doubled for couples.

hi, i'm not sure really as my mother in law is sorting it all out, i think his dad set up this fund over 12 years ago to ensure that his 4 kids got something when he died...

i looked up trusts etc and gifts and it seems that after 7 years in some circumstances no tax is payable so i'll have to get hold of mil and find out more details, one of the trustees is an accountant tho and he was the one who told her that we may be able to reclaim the tax if we don't earn much, but i'd guess that's for ppl on benefits as we're just above the threshold to be entitled to free glasses and dental care, but we do qualify for tax credits and my daughter gets the full EMA as she's at college...

just seems a huge amount of money to be taken off £10-£11,000, thought it would be on a sliding scale ie the higher the inheritance the higher the tax rate, hardly encourages ppl to hold on to anything for future generations..

Inheritance tax is normally 40%. Which tax is it that is being charged?

You can get decent advice by phoning up your local tax office with all the details but without knowing more, it's difficult to give an answer.

my husband has recently been told that his dad has left him some money in a trust fund, it is around £11,000 but will be taxed at 35%, this seems an awful lot, we don't earn a lot of money so it's a lot of money to us, we were told that if he gets a certificate saying how much tax he's paid on it, we may be able to claim some back, is this true? and if it is, how would you do that? any advice gratfully received, thanks, Mandy