Families managing the affairs of a deceased individual may be entitled to a substantial refund of Inheritance Tax (IHT), thanks to an often-overlooked provision and the recent downturn in global stock markets.
As financial markets grapple with ongoing trade disputes and economic anxieties, legal experts specializing in private wealth are reminding those responsible for settling an estate that declines in share prices can lead to tax reductions—provided they act swiftly.
Normally, IHT is calculated using the market value of assets, including publicly traded shares, as of the date of death.
However, if these shares are subsequently sold for a lower amount, the estate may be eligible to revise the valuation and reclaim tax payments based on the difference. This allows for a more accurate reflection of the asset’s worth at the time of sale.
Judith Millar, a partner in the Private Wealth team at Broadfield Solicitors, explains: “This provision essentially enables executors to substitute the actual selling price for the valuation established at death.”
To be eligible for this relief:
- All sales of qualifying shares must occur within 12 months of the date of death.
- An overall loss across all such sales is required to qualify.
- Claims must be submitted using HMRC’s IHT35 form within four years from the conclusion of that 12-month period.
Supporting documentation must include both the initial share valuation and the subsequent sale prices.
Current market volatility makes this relief particularly pertinent, according to Millar.
“It’s a potentially valuable opportunity for refund when stock markets decline,” she stated. “The option to claim back IHT already paid is very real.”
Recent weeks have seen significant fluctuations in stock markets driven by global economic unease and policy announcements.
It’s important to note that this relief applies exclusively to publicly traded shares and certain securities. It does not extend to unit trusts, holdings in private companies, or assets repurchased by the estate within two months of their sale.
“Given falling share values and sales occurring within the 12-month window, it would be unwise *not* to consider this relief,” Millar emphasized.
The standard rate for Inheritance Tax is 40 percent. Consequently, a considerable decrease in asset value can result in a substantial refund.
As an illustration, a £20,000 reduction in share value could potentially lead to an £8,000 tax reduction.
Executors are strongly advised to thoroughly review all share transactions occurring within the first year after death and to seek professional guidance when necessary.
Millar confirms that claims can be initiated even after the formal administration of the estate has been completed.
“Claims can still be made up to four years after the 12-month period ends,” she noted.
While the government provides the necessary forms and guidance on its website, legal professionals recommend meticulous documentation and expert consultation prior to submitting a claim.
