In the UK, Inheritance Tax (IHT) is a tax on the estate of someone who has died. The estate includes everything that the deceased owned, including property, investments, and personal possessions. The executor or administrator of the estate is responsible for paying any IHT that is due. If you believe that you have overpaid IHT, you may be entitled to a refund. To claim a refund, you will need to complete the IHT400 form, which is also known as the Inheritance Tax Account.
What is the IHT400 Form?
The IHT400 form, also known as the Inheritance Tax account form, is a comprehensive document used to report the value of an estate for IHT purposes. It is required when the deceased’s estate does not qualify as an ‘excepted estate’ and there's IHT to pay. The form has been updated as of January 18, 2024, to reflect changes in the probate application process in England and Wales, including the need for a unique reference code provided by HMRC.
Who Needs to Complete the IHT400 Form?
The responsibility of completing the IHT400 form generally falls to the executor or administrator of the deceased’s estate. It's a critical step in the probate or confirmation process, which legally enables the distribution of the estate.
Components of the IHT400 Form
The IHT400 form consists of several sections, including:
Details of the Deceased: This section gathers basic information about the person who has passed away, including their name, date of birth, and date of death.
The Executors: Information about the executors of the estate, such as their names and addresses, is provided here.
The Beneficiaries: This part includes details about the beneficiaries of the estate.
The IHT Calculation: A detailed calculation of the IHT due is presented here, considering any exemptions or reliefs applicable.
Payment of IHT: This section outlines the due date for payment and the methods of payment.
The Declaration: A declaration confirming the accuracy of the information provided
The IHT400 form is a critical document for the legal administration of an estate subject to Inheritance Tax in the UK. Its proper completion and submission are essential steps in the probate process, ensuring compliance with tax obligations and facilitating the orderly distribution of the deceased’s assets.
How to Fill Form IHT400 - A Step by Step Guide
The IHT400 form is an essential document for reporting an estate for Inheritance Tax (IHT) purposes in the UK. This step-by-step guide will assist you in completing the form accurately.
Section 1: About the Deceased
Deceased’s Details: Enter the full name, date of death, Inheritance Tax reference number, and domicile of the deceased.
Marital Status and Family: Indicate the deceased's marital status and list any surviving relatives, such as spouse, children, or siblings.
Last Permanent Address: Provide the deceased's last known permanent address.
Occupation and Identification Numbers: Include the deceased’s occupation, National Insurance number, and Income Tax number.
Power of Attorney: State if anyone acted under a power of attorney granted by the deceased.
Section 2: Contact Details
Contact Information: Fill in the name and address of the person or firm handling the estate. Include contact details and reference numbers.
Section 3: Deceased’s Will
Existence of a Will: Indicate whether the deceased left a will and provide its details.
Assets in the Will: Mention any assets specifically referred to in the will and whether they are included in this form.
Section 4: Inheritance Tax Account Schedules
Schedules: Tick the relevant boxes for the schedules you need to fill out, such as residence nil-rate band, transfers of value, jointly owned assets, etc.
Section 5: Estate in the UK
Assets and Liabilities: List all assets and liabilities, such as bank accounts, properties, stocks, and shares owned by the deceased in the UK. Include the value of jointly owned assets.
Deductions: Include details of mortgages, loans, funeral expenses, and other liabilities.
Section 6: Exemptions and Reliefs
Applying Exemptions: Describe any exemptions and reliefs being deducted, such as charity donations or agricultural relief, and calculate the amounts deducted.
Section 7: Other Assets for Tax Calculation
Foreign Assets: Report any foreign houses, land, or businesses, and other foreign assets.
Trusts and Pensions: Include assets held in trust and details of any alternatively secured pension funds.
Section 8: Working Out Inheritance Tax
Tax Calculation: If you choose to calculate the tax yourself, use this section to determine the tax due. Include details of residence nil-rate band, chargeable estate, and nil-rate bands.
Section 9: Direct Payment Scheme and Declarations
Direct Payment Scheme: Indicate if you want to use this scheme for paying Inheritance Tax.
Declaration: Confirm the type of grant you are applying for and where the application is being made. Sign the declaration to confirm the accuracy and completeness of the information provided.
Section 10: Checklist and Additional Information
Checklist: Go through the checklist to ensure all necessary documents and information are included.
Additional Information: Use this section for any extra details or explanations required, such as the disposition of specific assets or circumstances of debts.
Filling out the IHT400 form requires careful attention to detail. Ensure all assets, liabilities, and relevant information are accurately reported to comply with Inheritance Tax requirements. It is advisable to seek professional guidance if needed.
How to Submit the IHT400 Form?
Submitting an IHT400 form in the UK involves several steps, which are outlined below:
Obtain the form: The IHT400 form is available for download from the HM Revenue & Customs (HMRC) website or can be requested by post. You can also fill out the form online using HMRC's online service.
Gather information and documentation: Before starting to fill out the form, you will need to gather all the relevant information and documentation related to the estate, such as the value of the assets, debts, and liabilities, and any gifts made by the deceased person.
Complete the form: Once you have all the necessary information, you can begin to fill out the IHT400 form. You will need to provide details about the deceased person, the value of the estate, and any relevant exemptions or reliefs.
Submit the form: Once the form is completed, you will need to sign and date it, and submit it to HMRC. You can submit the form online or by post. If you choose to submit the form by post, it is recommended to send it via recorded or registered delivery.
Wait for processing: After submitting the form, you will need to wait for HMRC to process it. The processing time can vary depending on the complexity of the estate and the volume of claims that HMRC is processing at the time of submission.
Pay any tax owed: If the estate is liable for Inheritance Tax, HMRC will send a written confirmation of the amount owed and any deadlines for payment. The tax must be paid before the estate can be distributed to the beneficiaries.
Receive a refund (if applicable): If the estate is eligible for a refund of Inheritance Tax, HMRC will issue the refund as soon as possible after processing the form.
Overall, submitting an IHT400 form in the UK can be a complex and time-consuming process. It is recommended to seek professional advice from a solicitor or accountant to ensure that the form is completed accurately and in compliance with all applicable rules and regulations.
How Long Does It Take for HMRC to Process IHT400?
The processing time for an IHT400 refund form can vary, depending on the complexity of the estate and the volume of claims that HMRC is processing. HMRC aims to process most claims within 6 to 9 months of receipt.
It's important to note that the IHT400 form is not the only form that may be required when dealing with an estate. There may be other forms that need to be completed, such as the IHT205 form, which is used for smaller estates that are exempt from IHT.
What Is an IHT205 Refund Form
An IHT205 form is a form used in the United Kingdom to apply for a refund of Inheritance Tax (IHT) when the estate of a deceased person is below the IHT threshold, or when the estate qualifies for an exemption or relief from IHT.
The IHT205 form is also known as an "excepted estate form" because it is used for estates that are exempt from the full IHT process. The form is simpler and quicker to complete than the IHT400 form, which is used for larger or more complex estates.
To use the IHT205 form, the value of the estate must be below the current IHT threshold, which is £325,000 for the tax year 2022/23. If the estate is worth more than this amount, or if there are other factors that require a full IHT account, then the IHT400 form must be used instead.
The IHT205 form asks for basic information about the deceased person, their estate, and the beneficiaries. It also includes a statement of truth that must be signed by the executor or administrator of the estate. Once the form is completed, it should be submitted to HM Revenue & Customs (HMRC) along with any supporting documents, such as a death certificate and a grant of probate.
IHT400 vs. IHT205 Form
The IHT205 form, also known as the "excepted estate form," is used for smaller estates that are exempt from IHT. It is simpler and quicker to complete compared to the IHT400 form, which is meant for larger or more complex estates.
If the application is successful, HMRC will issue a refund for any IHT that was overpaid on the estate. The processing time for an IHT205 refund form is typically faster than for an IHT400 form, with most claims being processed within a few months.
2024 Updates and Changes to the IHT400 Form and Inheritance Tax Reporting in the UK
Recent Changes in Inheritance Tax Reporting
In recent years, there have been significant changes in the reporting requirements for Inheritance Tax (IHT) in the UK. These changes, particularly those implemented since January 2022, have impacted the way estates are assessed and reported for IHT purposes.
Relaxed Reporting Requirements
Since 1 January 2022, HM Revenue & Customs (HMRC) has relaxed the reporting limits for estates needing to provide a full IHT report on form IHT400. This change exempts many estates, allowing them to use the simpler IHT205 declaration instead. Key changes include:
Raising the threshold gross value of an excepted estate from £1 million to £3 million.
Increasing the value limit in relation to specified lifetime transfers from £150,000 to £250,000.
Simplifying the ‘alternative information’ to be produced for both small estates and exempt estates.
Removing excepted status from estates of foreign persons under certain conditions​.
Impact on Probate Applications
As of 17 January 2024, there have been revisions to the probate application procedure in England and Wales. These changes are relevant for those applying for probate, especially in conjunction with the use of the IHT400 form​.
Specific 2024 Updates to the IHT400 Form
With the continuous evolution of tax regulations, the IHT400 form has undergone various updates to reflect the current tax environment. As of 2024, the following are some of the significant updates:
Revised Pensions Reporting: Updates have been made to the IHT409 form, which is related to pensions. These updates involve general factors to consider while examining the form and specific details in various boxes of the form​.
Compensation Payments: The IHT400 now includes detailed sections for reporting various types of compensation payments. These range from compensation for discrimination to payments under specific schemes like the NHS Health Care Scheme and the Windrush Compensation Scheme​.
Assets and Liabilities: The form includes detailed reporting of other assets due to the deceased, such as private health schemes, copyrights, royalties, and council tax rebanding. This comprehensive approach ensures a thorough evaluation of the estate's value​.
Practical Implications for Taxpayers and Executors
These updates have practical implications for taxpayers and executors:
Estate Valuation: The increased threshold for excepted estates means more estates can avoid the full IHT reporting process, simplifying estate administration.
Reduced Administrative Burden: The relaxed reporting requirements and the exclusion of certain estates from the full IHT process mean a reduced administrative burden for executors and beneficiaries.
Comprehensive Reporting: Executors must be aware of the detailed requirements in the updated IHT400 form, especially concerning pensions and compensation payments, to ensure accurate and complete reporting.
The 2024 updates to the IHT400 form and the changes in IHT reporting requirements represent a significant shift in the administration of estates in the UK. These changes are designed to simplify the process for many estates while ensuring comprehensive and accurate reporting for larger estates. Executors and beneficiaries must stay informed about these updates to ensure compliance and efficient handling of estate affairs.
If you believe that you have overpaid IHT, you may be entitled to a refund. To claim a refund, you will need to complete the IHT400 form, which is a detailed account of the estate and the calculation of the IHT due. The form can be complex and time-consuming to complete, and you may need professional advice to ensure that it is completed correctly. HMRC will review the form and the supporting documents, and if everything is in order, they will issue a refund of any overpaid IHT.
How a Tax Accountant Can Help You with Inheritance Tax Refund
Navigating the complexities of Inheritance Tax (IHT) in the UK can be daunting, especially when dealing with a refund claim. This is where the expertise of a tax accountant becomes invaluable. A tax accountant's role in assisting with an IHT refund involves several key areas, ensuring that the process is handled efficiently, accurately, and in compliance with UK tax laws.
Expertise in Inheritance Tax Laws and Regulations
Understanding Legal Nuances: Tax accountants are well-versed in the nuances of UK tax laws, including the latest amendments and reliefs applicable to IHT. They can identify specific tax exemptions and reliefs that may apply to an estate, potentially reducing the overall IHT liability.
Navigating Complex Situations: Inheritance tax laws can be complex, especially when dealing with high-value estates, assets overseas, or trusts. A tax accountant can navigate these complexities with ease, ensuring compliance and minimizing the tax burden.
Accurate Valuation of the Estate
Assessing Assets and Liabilities: One of the first steps in claiming an IHT refund is to accurately value the estate. A tax accountant can ensure that all assets and liabilities are correctly assessed, including property valuations, investments, and any outstanding debts or mortgages.
Adjustments for Market Fluctuations: Tax accountants can make necessary adjustments for any fluctuations in the market value of assets between the date of death and the date of sale, which could affect the IHT calculation.
Filing and Managing the IHT400 Refund Form
Completion and Submission: Tax accountants can proficiently complete and submit the IHT400 form, ensuring that all information is accurate and all necessary schedules are included. This minimizes the risk of errors and delays in processing.
Handling Correspondence with HMRC: A tax accountant acts as a liaison between the estate representatives and HMRC, handling all correspondence, queries, and follow-ups. This can be particularly helpful in case of any disputes or inquiries from HMRC.
Maximizing Refund Opportunities
Identifying Overpayments: Tax accountants can review the IHT paid and identify any potential overpayments. For instance, if assets were sold for less than their valued amount, a refund may be due.
Claiming Reliefs and Exemptions: They can identify and claim various reliefs such as Business Relief, Agricultural Relief, or Taper Relief, which can significantly reduce the IHT due and potentially lead to a refund.
Estate Planning and Future Tax Savings
Strategic Advice: Tax accountants offer strategic advice on estate planning to minimize future IHT liabilities. This includes guidance on gift allowances, setting up trusts, and other tax-efficient ways of transferring assets.
Succession Planning: They also assist in succession planning, ensuring that assets are passed on to beneficiaries in the most tax-efficient manner.
Supporting Executors and Beneficiaries
Guidance for Executors: Executors often find the process of dealing with an estate overwhelming. A tax accountant can provide them with the necessary support and guidance throughout the process.
Beneficiary Consultation: They can also advise beneficiaries on their tax responsibilities, helping them understand their obligations and any potential tax implications of their inheritance.
Resolving Disputes and Providing Representation
Dispute Resolution: In cases where there are disputes over the valuation of assets or the amount of tax due, a tax accountant can provide expert representation and negotiate on behalf of the estate.
Professional Representation: Having a professional represent the estate in communications with HMRC adds credibility and can facilitate a smoother resolution of issues.
A tax accountant plays a crucial role in handling IHT refunds in the UK. Their expertise in tax law, experience with HMRC, and strategic approach to estate valuation and planning can save significant time and money for the estate. By leveraging their knowledge and skills, executors and beneficiaries can navigate the IHT process with greater confidence and peace of mind.