When and how to declare an inheritance to HMRC

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Updates to the Inheritance Tax (Delivery of Accounts) (Excepted Estates) (Amendment) Regulations 2020

The Inheritance Tax (Delivery of Accounts) (Excepted Estates) (Amendment) Regulations 2020 came into force in 1 January 2022 and they have changed the way in which the estates of people who died on or after 1 January 2022 need to be reported. 

The changes will mean that a wider range of estates will be deemed ‘excepted estates’ and they will not need to be reported to HM Revenue & Customs using the IHT400 Inheritance Tax Account. This is good news for certain estates which would previously have been required to be reported to HM Revenue & Customs due to the value of the estate or certain other factors, even where no inheritance tax is payable. Currently HM Revenue & Customs take approximately 20 working days to review an IHT400 Inheritance Tax account. The removal of this requirement for a wider range of estates will make the process of obtaining the grant of probate much quicker and simpler.

Which estates are now excepted estates under the new rules?

  • If the estate is less than £3 million and there is no inheritance tax payable (£1 million for deaths before 1 January 2022)
  • Where the total amount of lifetime gifts is less than £250,000 (£150,000 for deaths before 1 January 2022),
  • Where any assets held in trust are worth under £250,000 (£150,000 for deaths before 1 January 2022)

What else has changed with inheritance tax?

  • There is no longer a requirement to report to HM Revenue & Customs where the transferrable nil-rate band has been partially used up.
  • There is no longer a requirement to submit an IHT205 or IHT217 to the Probate Registry – instead the net and gross value of the estate for both inheritance tax and probate purposes will be reported to the Probate Registry using the online system MYHMCTS. 
  • The period of time in which HM Revenue & Customs may make enquiries about estates which have not been formally reported has been extended from 35 days to 60 days.

It is anticipated that the changes will simplify the reporting process for 90% of estates where inheritance tax is not payable, but a grant of representation is required to administer the estate. 

However, it should be noted that the same amount of information will still need to be obtained and verified before making the application – this includes obtaining property and chattels valuations, confirming account balances and details of all assets and liabilities and considering lifetime gifting. It remains the responsibility of the personal representative to establish the assets and liabilities in the estate, to correctly report this information and to pay any Inheritance Tax due. Our Moore Barlow private wealth team are here to help at all stages of the Probate process so please get in touch with us if we can assist you.