According to a recent Freedom of Information (FOI) request, the number of people who succeeded in getting an inheritance tax (IHT) refund has more than doubled in the past two years.
The data indicates that the number of people applying for an IHT rebate increased from 2,177 in 2016/17 to 4,516 last year, with the decrease in property prices being attributed to some of the increase.
Individuals can apply for a rebate on the IHT they have paid if they sell an inherited property for less than the value they paid tax on, as long as they sell it within four years of the death of the person who left it to them.
Currently, anyone inheriting a property, possibly apart from ‘direct descendants’ (spouses /civil partners, children, grandchildren, stepchildren, adopted children, foster children and great-grandchildren) pays 40 per cent IHT if the property is worth more than £325,000.
The tax owed is usually taken out of the estate, either directly from savings or from the sale of valuable items, such as a house, land or a car.
However, if the beneficiary sells the land or property within four years of receiving the bequest for less than the value used for tax, (meaning a difference of at least 5 per cent or £1,000, whichever is lower), they can apply to HM Revenue & Customs (HMRC) for a rebate.
Anyone who thinks they are due a rebate must complete an IHT38 form. It should be noted that all ‘appropriate person(s)’ must make the claim. This means any individuals who either paid the tax or who have the obligation to pay it, must agree to sign.
Mike Bagg, Partner at Milsted Langdon, said: “Inheritance tax refunds are becoming more common, particularly with the downturn in the property market. It’s important that individuals are aware of applying for an IHT rebate because HMRC will not automatically alert you if you have paid too much tax.
“For advice on matters relating to personal tax, including IHT, contact our expert team at Milsted Langdon today.”