Are You Due a Refund on Your Inheritance Tax (IHT)?

If you have paid this tax recently, you may well be due some of your money back.

When somebody dies their estate is valued for inheritance tax (IHT), purposes on the basis of what it is worth on the day they died. If IHT is owed, then it must be paid within 6 months. But if assets are sold for less than the initial value within 12 months, you can claim an IHT refund.

One important area, is that after the recent falls in the stock market, it is likely that many more bereaved families will be able to benefit.

IHT is levied at 40% on estates worth more than £325,000. Married couples and people in civil partnerships can pass their assets to their other halves without incurring any IHT.

When the surviving partner dies, they can then use both IHT allowances, which means that they can pass on £650,00 without incurring IHT.

There is also a relatively new allowance for your home, known as the ‘Resident Nil Rate Band’ you can pass up to £175,000 (this rose from £150,000 in April 2020) of the value of your family home on to ‘direct decedents’ a married couple could therefore pass on their home worth up to £350,000 plus additional assets worth up to £650,000 without attracting IHT.

There are some catches to IHT refund on sold assets. If the shares have already been inherited, then the beneficiary cannot sell them and claim a refund, they have to be sold by the executor of the estate.

Further more, shares are aggregated when valued for IHT. This means if the value of some shares has risen, it will reduce the amount of tax that can be reclaimed. Never the less, the executor could pass on stocks that have risen in value to beneficiaries, and sell those that have fallen in order to claim a refund.

It is also worth considering if you want to crystallise your losses in order to claim a tax refund, ‘the double dash digit stock market’ falls year to date, are current only paper loses, and those loses are not locked in until the assets are converted to cash, so selling may not be the right approach if you can allow the shares time to recover.

Many people may also be able to claim tax refund of property. IHT can also be reclaimed when houses are sold at a lower value within 4 years of the death.

If the Corona virus effects house prices, it is important families are aware of this.

You can claim an IHT refund within a certain period of time.

We have recently reclaimed, and been successful in re-claiming a sum of £28,000 to an estate.

As one can imagine, HM Revenue and customs are here to collect tax, and not pay it out. The information that HMRC will require can sometimes be quite detailed and subject to negotiation.

Again, for any further assistance please do not hesitate to contact us.