Almost 18,000 Families Hope Their Inheritance Tax Was Overpaid
Just when you think the UK’s inheritance tax system is all doom and gloom, a new set of Freedom of Information (FOI) figures has revealed that over the past three years families have filed more than 18 000 claims for refunds on the tax they thought they had paid. That’s more than enough to fill a small village!
What’s the Story Behind the Numbers?
- 12 915 of those claims are linked to the sale of property – that’s nearly two‑thirds of all the cases.
- Inheritance tax is usually due within six months of someone’s death, often before an estate’s most valuable assets – like houses – are actually sold.
- When those assets end up selling for less than their “probate” (official) valuations, families can claim back the excess tax they paid.
Why So Many More Claims?
According to Steve Bish, founder of S Bish Estate Planning, three factors are driving the spike:
- Housing market volatility – the post‑pandemic slowdown in the UK property market saw many homes selling below their probate valuations, sparking a surge in claims for the Loss on Sale of Land relief, a tax adjustment that refunds overpaid IHT when a property is sold at a loss within four years of death.
- Long‑term price growth – despite short‑term dips, the long story of rising property values has pushed more estates past the £325 000 inheritance tax threshold (or £500 000 when including the residence nil‑rate band). Families now face a high initial tax bill but later sell inherited properties for less, triggering refund claims.
- Frozen IHT thresholds – the tax thresholds haven’t changed for years while estate values climb, meaning more estates get sucked into the IHT net and later be overvalued in a spinning market. This mismatch results in overpayment that many are now clawing back.
A Few More Things to Keep in Mind
- There’s an increased awareness of reclaim opportunities thanks to better publicity and expert advice. Executors now know that refunds can be available, especially when selling property or shares after a death.
- Share market volatility counts too. Over the last three years, 5 096 claims were filed due to drops in share values within twelve months of death. HMRC’s IHT35 form lets executors reclaim tax if stocks or investments fall in value and are sold at a loss within a year.
- Probate delays often mean that IHT is paid based on outdated or estimated valuations. When asset values later drop, families are more likely to overpay.
What Should Families Do?
If you’re an executor who’s sold a property or shares for less than you thought and that sale occurred within the relevant window, take a moment to review your IHT payments. You might be entitled to a refund you’re unaware of. Don’t let this be a “roommate on the wrong side of a house sale” – it could save you a nice chunk of money.
Get the word out: knowing you can reclaim overpaid inheritance tax can turn a tax nightmare into a nice, unexpected financial win.
