Reclaiming overpaid Inheritance Tax - what you need to know

For those administering the estates of those individuals who passed away before the Coronavirus Pandemic, they may now find themselves in the difficult situation of selling shares or property, at lower values than originally planned.

If Inheritance Tax (IHT) has already been calculated and paid based on higher values, there may be an option to reclaim the tax paid on the lost value of these assets.

In broad terms, IHT is generally applied to estates valued over the nil-rate band which is £325,000 for an individual and so tax may be payable on estates which exceed this value at a rate of 40%.

Tax is calculated on the value of assets at the date of death which may have been considerably higher than the actual value achieved on the sale of shares or property, following the impact of the Coronavirus Pandemic.

IHT Loss Relief enables appropriate persons, usually the personal representatives, to apply for a refund of the overpaid tax if property or shares are sold at a lower value; a loss.

A claim for IHT Loss Relief can be made for the sale of listed shares and securities and unit trusts, for those sales that take place within 12 months of death, and for land and property for those sales that take place within 4 years of the date of death.  The time limits for making these claims are 5 and 7 years respectively.

There are some specific rules to be considered and once a claim is made it cannot be withdrawn.  It is therefore important to seek advice to fully understand the position, process and ultimately the tax refund that could be due.

In light of the uncertain times we face, the ability to reclaim IHT may be more important than ever.

If you would like to understand whether you can make an IHT reclaim and for further detail on the rules, please get in touch by emailing tax@streetsweb.co.uk