FOI – Almost 32,000 reclaims for overpaid inheritance tax made in past six years

Share

Families in the UK have made nearly 32,000 reclaims for overpaid inheritance tax in the past six years, new official figures obtained by financial advisers NFU Mutual have revealed.

Inheritance tax 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, 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.

It’s available if the executors sell property within four years of the death, or if they sell shares or other qualifying investments within 12 months of the death.

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.

“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.

“There have also been nearly 10,000 reclaims made following a fall in shares or investment values.

“During times of market volatility its important families check whether they have overpaid inheritance tax, in some circumstances reclaims can amount to thousands of pounds.”

Reclaims for overpaid inheritance tax

 Property/landShares/investmentsAll reclaims
2016/172,2792,0504,329
2017/184,0658544,919
2018/194,5391,3985,937
2019/204,8871,8096,696
2020/213,6232,2185,841
2021/222,9611,2804,241
Total22,3549,60931,963
*Source: Freedom of Information request to HMRC

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.

During periods of stock market volatility, there are ways families can maximise how much inheritance tax they reclaim.

McCann said: “As more families get dragged into 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.

“In these circumstances, it may be more advantageous for the executors to pass the shares or investments that have increased in value direct to the beneficiaries rather than sell them. This means you make a claim only for those shares that have fallen in value, ensuring you maximise the benefit.”

ADVERTISEMENT