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November 8, 2023
A growing number of families across the UK have put in claims for overpaid inheritance tax. Figures from a new survey show families made nearly 32,000 tax reclaims in the past six years.
The reclaims figure was obtained in a freedom of information request to HMRC years, by financial advisers NFU Mutual.
Sean McCann, chartered financial planner at NFU Mutual, said: “A large inheritance tax bill can be a nasty shock for grieving families. These figures show that more and more people are waking up to the possibility that they could reclaim overpaid inheritance tax.”
How is inheritance tax worked out?
Inheritance tax (IHT) is assessed on the value of a person’s estate on the date of death and the tax must normally be paid within six months. If property or shares are sold at a lower value following the death, tax can be reclaimed.
If, when the executors come to sell any property or shares, the price has fallen, they can reclaim the overpaid tax from HMRC. The tax refund is not automatic and has to be pro-actively reclaimed.
What does IHT entail?
Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who’s died.
There’s normally no Inheritance Tax to pay if either:
Mr McCann added: “Considering the buoyant housing market, it’s surprising to see more than 22,000 reclaims have been made on the sale of property or land.
“In some cases, this will have been a result of property being overvalued on the inheritance tax return or because of deterioration of the property between the death and subsequent sale.”
How to maximise the amount you reclaim
Inheritance tax is expected to raise £37bn in the next five years, an increase of £10bn compared to the £27bn it raised in the past five years.
Mr McCann explained: “As more families get dragged into the inheritance tax net, it’s important they realise they can reclaim overpaid inheritance tax.
“If you are reclaiming overpaid IHT following a fall in shares or investments, all qualifying investments sold by the executor in the 12 months following death have to be included in the claim, not just those that have fallen in value. If some have increased in value, this will reduce the amount of inheritance tax that can be reclaimed.”
For advice and support please contact Chris Moir, Head of Personal Tax, at RMT Accountants & Business Advisors on 0191 256 9500 or via the contact us form.