For families dealing with an estate, an IHT return can be one of the more complex parts of the administration process. There are a number of deadlines to meet and significant amounts of information to gather, meaning it can be easy for executors navigating probate for the first time to underestimate how long the process can take.
Missing the filing deadline can have financial consequences. An initial penalty of £100 can increase to as much as £3,000 if the return remains outstanding after 12 months, with interest potentially also applying to late payment of IHT.
IHT returns can be more complex than families expect
The basic Inheritance Tax form (the IHT400) contains 122 questions, with more than 30 additional schedules that may need to be completed depending on the circumstances of the estate. Many of these questions require detailed information about the deceased’s assets, liabilities and financial history, as well as an understanding of specific IHT rules.
Gathering all the required information can be extremely time-consuming. Executors may need to trace bank accounts, investments, property, debts, and gifts made many years before the person's death. For someone dealing with an estate for the first time, and without professional experience of the process, it is easy to see how mistakes or delays can arise.
Obtaining accurate valuations for assets in the estate can also create delays. In some circumstances, a professional valuation of residential or commercial property may be appropriate, while other assets, such as shares, need to be valued using specific rules for IHT purposes.
Trying to complete the return without specialist advice can take considerably longer than expected, particularly where HMRC requires extensive supporting evidence.
From 6 April 2027, most unused pension funds and death benefits will be brought within the scope of IHT. This will add another layer of complexity for families administering estates, particularly where the deceased held pensions with multiple providers.
DIY IHT returns can make it harder to identify available reliefs and exemptions
It can also be difficult for someone without specialist knowledge to identify all the IHT reliefs and exemptions that may apply to an estate, and to gather the evidence needed to support those claims.
For example, certain gifts may fall outside the IHT calculation, depending on when they were made, their nature and the circumstances in which they were given. The exemption for certain gifts made out of surplus income is another area where detailed records and evidence can be important.
Avoiding penalties is only one reason to consider taking specialist advice. More importantly, failing to identify and claim the reliefs and exemptions available to an estate could result in an unnecessary overpayment of IHT.
What should executors do?
- Start gathering information early – particularly details of property, investments, gifts and pensions.
- Check the relevant deadlines – don't assume the IHT return can wait until probate is complete.
- Consider specialist advice where the estate is complex – particularly where there are significant gifts, trusts, business/farm assets, multiple pensions or questions over valuations.
How TWM can help
At TWM Solicitors, our Private Client team advises executors and families on Inheritance Tax and estate administration.
We can help you understand what needs to be reported to HMRC, identify relevant reliefs and exemptions, and deal with the technical requirements of preparing and submitting an IHT return.
Taking advice early can also help you gather the necessary information and valuations, meet the relevant deadlines and reduce the risk of costly mistakes.
If you are dealing with an estate and need advice on Inheritance Tax or completing an IHT return, please contact our Private Client team.