More than 18,000 families have received Inheritance Tax refunds since 2022. Are you owed one?

Most parents and grandparents would agree that one of their greatest priorities is setting their children and grandchildren up for future success in life. Teaching them important life lessons, setting a good example, and yes, offering wealth to help them along their journey are all part of this.

That is why Inheritance Tax (IHT) is a controversial topic. Many don’t believe it should exist at all, while others call for its rules and thresholds to be updated.

Whatever your opinion of “Britain’s most-hated tax”, it could come as a surprise to learn that more than 18,000 families have received IHT refunds from HMRC between 2022 and 2025, Which? reports.

Keep reading to explore how families could end up overpaying IHT, how to claim a refund if you believe you are eligible, and why professional advice is essential for mitigating IHT.

2 reasons why an estate could be owed an Inheritance Tax rebate

When a person passes away, the executor of their estate is responsible for calculating the value of their estate. This may include having properties professionally valued, locating shares the person owned, and accessing their cash accounts to discover how much they had.

Afterwards, the executor submits this to HMRC. They then learn whether the estate has attracted IHT and if so, how much is due.

The executor then needs to pay IHT to HMRC, usually within six months. If they aren’t able to access funds from the estate for longer than six months, the IHT due may incur further interest.

So, you could be wondering: “How could a person accidentally overpay IHT, and how would they find out if this is the case?”

Here are two reasons why an estate could be owed an IHT refund.

1. Inherited shares dropped in value before a sale

If a person passes away and leaves shares as part of their estate, these are valued at the time they died. This valuation is then added to the total valuation of the estate for IHT purposes.

However, if the estate then sells these shares for a lower value – for example, if there is a stock market dip prior to the point of sale – then the IHT paid might be too high.

In this instance, you could reclaim some of the IHT you paid. However, there are several stipulations to review first:

• The investments must have been sold within a year of the person’s death.
• They must be “qualifying investments”, including those registered on the stock exchange, government bonds, and unit trusts.
• The sale price is considered “gross” and deductions, such as Capital Gains Tax (CGT), aren’t considered in the relief.

These are only three of several considerations that will be looked at before your refund is paid out.

2. A property was valued incorrectly, deteriorated before sale, or sold at a lower price than valuation within 4 years

Property valuations can be subjective. It’s useful to obtain several valuations after a person dies and leaves a property behind, to ensure you are accurately reporting this value to HMRC when paying IHT.

If you are the executor and you feel that you overpaid IHT based on an incorrect valuation, you could appeal to HMRC for a rebate. Likewise, if you had the property valued upon the person’s death and its condition deteriorated, this could provide grounds for a refund too. 

There is a time limit on claiming this kind of refund. Usually, if the house was sold more than four years after the person’s death, you won’t be able to make your case to HMRC.

If you believe you have overpaid Inheritance Tax, contact HMRC

Whether you’re the executor of a loved one’s will or were a beneficiary within the last four years, it’s important to pay attention to the above rules and work out whether the estate overpaid IHT. Only the executor is responsible for this, but if you were a beneficiary, you could get in touch with them to discuss the matter.

Ultimately, HMRC decides whether to issue a refund. It’s worth getting in touch, even if you are not sure.

Work with us to mitigate the IHT on your own estate

While dealing with the estate of a loved one who has already passed away, you may also be preparing your own estate. You likely wish to pass down as much as you can to the next generation, but to do so, you will need to plan ahead.

The IHT nil-rate bands – the amount that dictates how much you can pass down tax-free – are frozen until 2030. In fact, the nil-rate band of £325,000 has remained the same since 2009. The additional residence nil-rate band, which is available to most people leaving their main home to a child or grandchild, has been fixed at £175,000 since 2020.

As such, if your estate continues to rise in value, the nil-rate bands won’t rise with it in the next five years.

Here at Depledge, we work with our clients to mitigate the IHT due on their estate when at all possible. Strategies include making lifetime gifts to the next generation rather than leaving everything in a will, and utilising tax-efficient vehicles, such as pensions and trusts, to pass wealth down tax-efficiently.

We also stay abreast of legislative changes and help our clients navigate them. For instance, pensions are set to be included in estates for IHT purposes from 2027, which means this may no longer be a viable tax-efficient estate planning route. This legislation is still subject to change, so we’re keeping our eye on what the government decides to do going forward.

If you are interested in mitigating IHT and savouring your wealth for your loved ones – or you think you’re due a rebate and need advice – speak to us today.

Email info@depledgeswm.com or call 0161 8080200.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, trusts, will writing, or tax planning. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.