UK IHT regulations amended to exempt many more estates

Monday, 25 October 2021
HMRC has amended the Inheritance Tax (Delivery of Accounts) (Excepted Estates) (Amendment) Regulations 2021 to implement suggestions made by HM Treasury's Office for Tax Simplification earlier in 2021, aimed at exempting many more estates from the need to submit detailed estate returns as a condition of obtaining probate.
inheritance tax

The amendments apply to deaths occurring anywhere in the UK from 1 January 2022. They include:

  • raising the threshold gross value of an excepted estate from GBP1 million to GBP3 million;
  • raising the value threshold of an excepted estate's chargeable trust property from GBP150,000 to GBP250,000, although the total amount of trust property including exempt amounts is limited to GBP1 million;
  • increasing the value limit in relation to specified lifetime transfers from GBP150,000 to GBP250,000;
  • amending the definition of ‘IHT threshold’ to include cases where some of the available threshold was used when the first of a married couple or civil partnership died and a claim is made for the unused percentage to be made available against the current estate (the transferable nil-rate band);
  • simplifying the 'alternative information' that is to be produced for both small estates and exempt estates; and
  • removing excepted status from estates of foreign persons where the deceased either owned indirect interests in UK residential property or made lifetime gifts of UK assets above GBP3,000 in the seven years before death, unless the estate is not liable for IHT.

The amended regulations also extend the period during which HMRC can ask the personal representatives for additional information to show that the estate qualifies as excepted to 60 days. This brings the rules in England, Wales and Northern Ireland into line with Scotland's regulations. At the same time, HM Courts and Tribunal Service will be given a full month to transmit probate application information to HMRC.

HMRC expects the amendments will ‘significantly reduce’ the costs for businesses, charities and voluntary bodies that administer estates. ‘Around 60% of the 240,000 estates a year affected by this measure (approximately 145,000 a year) are administered by probate practitioners and solicitors with ongoing savings,’ HMRC says in its explanatory memo.

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