Back to News

UPDATE: Relaxation of Inheritance Tax (IHT) reporting requirements.

In March 2021, the Government announced that from 1 January 2022, changes would be made to simplify the reporting and compliance requirements during probate. The proposals for change followed a Government consultation designed to reduce the administrative burden faced by those dealing with IHT. The changes have now been enforced and mean that over 90% of non-taxpaying estates do not have to deliver IHT accounts when a grant of representation is required.

So then, what are the changes and what are their effects?

Legal Background

In order to understand the effect of the changes, it is important to put them in their legal context.

When someone dies, their personal representatives (‘PR’) must determine the value of their estate – the sum of their assets and liabilities – and calculate whether the estate is liable to IHT. In order to obtain a grant of representation, and thereby administer the estate, the PR must report the estate’s IHT liability to HMRC through an IHT account. There are two main types of IHT account:

  • The IHT205 – this is a shorter form which is submitted to the Probate Registry at same time as the PR applies for the grant of representation. This can be applied for where the estate is an ‘excepted estate’ (i.e. it is of low value, it is exempt, or the deceased was not, has never been or never deemed to have been domiciled in the UK, provided conditions are met).
  • The IHT400 – this is a much longer form which is submitted to HMRC before the grant of representation can be applied for. This account requires much more detail, and prior to the reforms outlined below, it was often necessary to file this even where there was no IHT liability.

The Changes

The changes introduced by the Government are removing the requirement to complete an IHT205 account for excepted estates for deaths occurring on or after 1 January 2022. The PR will still need to report information relating to IHT liability, but this can be included in the probate or certificate of confirmation application. The most significant changes include:

  • Where the estate is of low value (i.e. the gross value is lower than the IHT threshold), the limit of certain lifetime transfers and trust property has increase from £150,000 to £250,000.
  • Where the estate is exempt (i.e. the gross value is higher that the IHT threshold, but the spousal or charity exemption brings the net value under the IHT threshold);
    • The value limit of the gross estate has increased from £1 million to £3 million.
    • The value limit of assets on chargeable trust property has increased from £150,000 to £250,000, but the value of assets in the trust is limited to £1 million where the trust includes assets which pass to the spouse or charity.
    • The value limit for ‘specified transfers’ has been increased from £150,00 to £250,000

If you are a Personal Representative and you need assistance with obtaining a grant of representation or with estate administration in general then please get in touch with a member of Mercers highly experienced Private Client Department to discuss how we can assist you.

Written by Tom Spratley – Trainee Solicitor.


What People Are Saying

Hear what some of our clients have to say about Mercers Solicitors...

I just want to thank you again for all your help… we couldn’t have placed ourselves in more trusting, caring hands than your good kind self. It was great we had the opportunity to meet you when we did Alex!

Mrs A from Maidenhead

Peter has gone above and beyond with his informative, sympathetic and extremely wise advice.

Mrs H of Oxfordshire

We should like to place on record our appreciation of the highly professional and yet patient and stress-free manner in which Mercers have handled these matters for us.

Anon

I really do want to thank you for your patience, kindness and the meticulous way in which you tackled both me and my problem.

Mrs D from Maidenhead

Very professional and helpful. Don't know what I would have done without Shella!

Mrs G of Australia

You are so meticulous, efficient, and very responsive. Your professionalism and quality of work is outstanding. The fact that this matter was carried out during the very challenging times we have all experienced due to the Pandemic, makes the level of your service even more outstanding. Throughout the complete process I have always had the feeling that I was working with a friend I had known for years.

Mr D of Oxfordshire

Having sometimes experienced slow and reactive lawyers, it was refreshing to deal with Ruth and her team. The transaction was done promptly and smoothly. We will definitely use Ruth again and would have absolutely no hesitation in recommending her to family and friends.

Mrs B of Berkshire.

We have never experienced such fast and efficient return of communication from any past or present Paralegal/ Solicitor. Thank you Jess and Sam.

Mr & Mrs Masri of Berkshire

I have always received first class service from Sarah Crowther. Her advice and suggestions have always proven excellent. What she says she will do she does.

Mrs W of Berkshire

Thank you for all your care and understanding in helping me … through the complexity of a will.

Mr P from Berkshire

Quality, professional firm with integrity, nice people – I had a first class experience.

Mr A S of Oxfordshire

We have very much appreciated Paula's patience and expert guidance through, for us, a tricky landscape.

Mr A and Mrs S

Contact Us

Talk to a Mercers expert today

Contact Us