Inheritance Tax


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Even we are told that Inheritance Tax is charged on fewer than five per cent of estates, if you are dealing with the estate of someone who has died, you will still need to complete one or more Inheritance Tax form for HM Revenue & Customs if you need to obtain a Grant of Probate.

Which forms you will need to complete will depend on the value of the estate, and which allowances you wish to claim.

Deadline for payment of Inheritance Tax

The first thing to be aware of is that if any Inheritance Tax is payable as a result of the death, this must be paid by the end of the sixth month

following the death.

You will not be able to obtain a Grant of Probate if the Inheritance Tax has not been paid.

Valuing the estate

The estate of the person who has died is made up of everything they owned. This includes not just savings, bank accounts, shares, investments, and

property held in their sole name, but their share of any of these assets held in joint names.

Any debts the person had reduce the value of their estate for Inheritance Tax.

The Inheritance Tax allowance

Inheritance Tax is paid on the value of the estate which is above the Inheritance Tax allowance of £325,000. This sum is known as the nil rate band. Inheritance Tax is charged at 40% on the value of the estate which is over the nil rate band allowance of £325,000.


There are Inheritance Tax exemptions available, meaning that tax is not paid on any part of the estate or any gifts in the Will passing to exempt beneficiaries.

The most commonly claimed exemptions are those for a spouse/civil partner and charity.

So if the estate of the person who has died passes entirely to their surviving spounse, no Inheritance Tax will be payable. In this case, the shorter Inheritance Tax Return form can usually be completed.

If the person who has died had received assets from their deceased spouse, then there will be an additional allowance available. The additional allowance must be claimed and is not given automatically.

There are complications here, because if the first spouse did not leave their entire estate to the person who has died (perhaps because they left legacies to their children or grandchildren), the amount of the exemption that can be claimed will need to be calculated as a percentage of their estate. Where the whole of the nil rate band allowance is not available, the longer and more detailed Inheritance Tax Account form IHT400 will need to be completed.

The Family Home Allowance

In addition to the nil rate band allowance, there is also a family home allowance. Whilst the nil rate band allowance is available to everybody, the family home allowance is only available where the person who has died is

passing on a share of their home (their main residence) to a direct descendant.

The value of the family home allowance is £175,000. If the value of the family home is less than this, the value of the allowance is equal to the value of the family home. This family home allowance is added to the nil rate band allowance and means that a single person passing on their estate, including their home, to their children or grandchildren has a total allowance of £500,000 before Inheritance Tax is payable.

If you need to claim the family home allowance, you will need to complete the longer Inheritance Tax Account, form IHT400.

The Inheritance Tax Return (IHT205)

The IHT205

This is the shorter of the two Inheritance Tax forms and can be used where no tax is payable and you do not need to make a claim to use the family home allowance.

The Inheritance Tax Account (IHT400)

This is a much longer and more detailed form. It should be used where there is Inheritance Tax to be paid.

The IHT400

This same form will also need to be used if you wish to claim the family home allowance and where you wish to claim the unused nil rate band allowance of the first spouse where the entire allowance is not available.

If you are completing the IHT400, you will also need to complete additional pages which separately collect information about the deceased person’s

bank accounts, pensions, life policies, shares and investments, home and other property. If the person who has died made gifts tn the last seven years, you will need to provide full details of these, too.

Penalties and interest

Whether you are completing an IHT205 or an IHT400, you will have to sign a Declaration that the information you have given is correct to the best of your belief.

The IHT205 warns that if the estate fails to qualify as an ‘excepted estate’, and you have discovered that Inheritance Tax should be paid, you must notify HM Revenue & Customs within six months of becoming aware that that the estate did not quality. You are warned that there may be financial penalties to be paid and you could face prosectuion if you do not notify HM Revenue & Customs within this time frame.

The IHT400 also offers dire warnings. You may be liable to prosecution if you deliberately conceal any information that affects the estate’s liabiity to Inheritance Tax, or if you include information which you know to be false.

In addition, the IHT400 goes on to warn that you may have to pay financial penalties if the account is delivered late, or if you fail to correct anything in the account which is incorrect, within a reasonable time of it coming to your attention.

HM Revenue & Customs hold detailed records about taxpayers and may know more than you do about the deceased person’s assets and income. They do carry out random checks on information returned in the Inheritance Tax forms, so you need to make sure the information you provide is as accurate as possible.


It could take many weeks to identify all the assets in the estate of the person who has died. Some people leave behind meticulous records, but more people do not, and some leave behind vast numbers of carrier bags filled to overflowing with paper records of their entire lives, including cashpoint receipts and bus tickets!

There may be valuable information amongst the detritus, so don’t be too quick to throw away all the historic paperwork.

If the estate is taxable, HM Revenue & Customs will issue a receipt up to 21 days after the tax due immediately has been paid. This receipt will be sent directly to the Probate Registry.

The Probate Registry are presently advising that they expect to issue the Grant between 4 – 8 weeks after receipt of the application.

We’re Here To Help

Even where there is no Inheritance Tax to be paid on the estate of the person who has died, there is still information to be collected and the value of the estate to be reported to HM Revenue & Customs if you need to obtain a Grant of Probate.

We are able to help you with any aspect of valuing the estate, completing the Inheritance Tax forms and making the application for a Grant of Probate. We can also take the whole task off your hands, if you would like us to do so, leaving you free to deal with the grieving process without being burdened by a lengthy administrative process.

If you have any questions about Inheritance Tax or the probate process, please give me a call so we can have a free, no obligation, chat: 01308 424808 or email me at

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