Inheritance Tax Relief When Property Values Fall

More and more estates are selling properties for less than the value price given to HMRC during probate, resulting in property being sold at a loss and estates paying too much inheritance tax (IHT).

Why Are Some Estates Paying Too Much IHT?

The reason why this is occurring more frequently is due to a combination of the slowing property market, rising interest rates, traditionally high house prices and some delays in getting a Grant of Probate.

IHT is calculated based on the property valuation at the date of death. If there is a fall in the property’s value between the date of death and the sale of the property, the estate can end up paying more IHT than is fair for the sale price of the property.

What Happens If You Pay Too Much IHT?

It is possible to make a claim to HMRC for inheritance tax relief for some of the difference.

You can make an application to HMRC for relief on the loss of the property sale, explaining the change in situation and requesting to, in effect, change the value price for the IHT calculation to make it the lower sale price instead.

This would mean the estate would pay the equivalent IHT due on the sale price amount rather than the higher sum based on the value given at date of death.

Making An Inheritance Tax Relief Claim

Executors and beneficiaries can claim back some of the IHT the estate has already paid.

There are conditions for claiming IHT loss relief for land, including:

• The claim must be within 7 years of the date of death, but the property sale must have been made within 4 years of the date of death
• The loss must be in excess of £1,000 or 5% of the valuation at the date of death
• Executors must have made the sale – beneficiaries who inherit the property and sell it on, even if it is within the 4-year time limit, cannot claim
• IHT loss relief is not available for property transfers or for sales to beneficiaries or other relatives

Helping You To Claim IHT Relief

If you need to make a claim for inheritance tax relief for property that has fallen in value, our specialist solicitors are here to help.

We will take the time to understand your situation, tailoring our expert advice to ensure you’re able to successfully make a claim to HMRC for relief on the loss of the sale of land.

To speak to one of our professional solicitors about inheritance tax relief, please contact us at our Chorlton office on 0161 860 7123 or email chorlton@hlfberry.com or at our Failsworth office on 0161 681 4005 or email failsworth@hlfberry.com