Inheritance tax refunds

Inheritance tax (IHT) is a tax on the estate (that is the property, money and possessions) of someone who has died. There is usually no IHT to pay if the value of the estate is below the current threshold of £325,000 or if the deceased leaves everything above the £325,000 threshold to their spouse, civil partner, a charity or a community amateur sports club. Even if the value of the estate is below the threshold, it is still necessary to report it to HM Revenue and Customs (HMRC).

The standard IHT rate is 40% and is only charged on the part of the estate that is above the threshold. The workings of this tax have become increasingly complicated and there are a number of reliefs and exemptions available which may result in a reduced tax liability.

The estate will include the value of any shares owned by the deceased at the date of death. Following the impact of Covid-19 on stock markets around the world, the value of shares fell dramatically. Commentators have thus pointed out that shares which were inherited before the fall in market values will have resulted in a tax bill which was calculated on the higher prices in effect prior to the fall in the stock markets.

The result of this is that if someone has recently inherited shares, they may be entitled to a refund on IHT which was paid in relation to them. It is possible to make a claim for loss relief within 12 months of inheriting the assets.

This is a complex area and anyone who may be affected should take specialist advice.

To discuss this or any other probate related matter, contact us.

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