Could your family be due an inheritance tax refund?
Falling house prices mean that families who have paid more inheritance tax than they needed to may be due a refund.
In the five years to June 2018, around 15,000 families applied for an IHT refund after homes they inherited ending up selling for less than they were valued for at probate.
A general ongoing decline in UK house price growth, with the South West down by 0.9 per cent in the last year and London a hefty 4.4 per cent, indicates this is a trend likely to continue.
Difference in values
Death duties must be paid before probate is granted giving executors the authorisation to administer the estate and distribute the assets to any beneficiaries.
In almost all cases, this means any property must be valued before being sold with the IHT due based on this valuation.
Finding a buyer can take a while and if the property sells for less than the value originally quoted to HMRC within four years of the former owner's death, a refund may be claimed.
Inheritance tax and allowances
IHT is charged at 40 per cent in a person's estate after any available individual allowances have been applied. Currently, the individual allowance is £325,000.
If a main residence passes to lineal descendants, a further exemption may apply which is currently £150,000 rising to £175,000 from 6 April 2020.
In a simple example, in a taxable estate, if a house was valued at £250,000 at death but later sold for £240,000, the estate would potentially be due a £4,000 refund.
How to claim a refund
Many people, particularly those who chose DIY probate, may not be aware that an IHT refund can be claimed.
HMRC will not contact you to tell you this.
The rule of thumb is that there must have been a fall in the property price of at least five per cent or £1,000, whichever is lower, in the four years after the former owner's death.
Making a claim costs nothing and is done by completing and returning HMRC form IHT38.
To make or update your Will or discuss inheritance tax please contact any member of Wards Solicitors' specialist Wills, Probate and Mental Capacity team now one of the largest in the South West.