Form

IHT206 notes to help you fill in form IHT205 (2011)

Updated 17 March 2023

When to use these notes

These notes only apply when you’re filling in form IHT205 (2011) Return of estate information. The death must have happened:

• on or after 6 April 2011, and
• on or before 31 December 2021

It’s important to use the notes so you can complete the form correctly.

You may make yourself liable to financial penalties if the information you give in the form is incorrect, incomplete or false.

For deaths after 31 December 2021

See HMRC’s guidance How to value an estate for Inheritance Tax and report its value for information on the changes to :

• reporting estate information
• the excepted estates conditions from 1 January 2022

For deaths before 6 April 2011

You must complete the correct version of form IHT205, depending on when the deceased died. These are available from HMRC’s forms page Inheritance Tax: return of estate information (IHT205) for deaths before 6 April 2011. The notes to help you complete the right form can also be found on the forms page.

Definitions

These notes using the following terms:

• we or us means HMRC
• the deceased means the person who has died
• spouse means the deceased’s husband or wife f a person who is legally married to someone else
• civil partner means someone who has legally registered a civil partnership with another person

Introduction

You usually need a grant of representation to get access to most of the assets in the deceased’s estate. The most common types of grant are:

• a grant of probate, where the deceased left a will
• a grant of letters of administration, where the deceased did not leave a will

You may hear both types of grant referred to as probate. If you do not need to get a grant of representation then you do not need to complete a form IHT205.

Before you can get a grant, you need to pay any Inheritance Tax that is due, or be able to show that there is no Inheritance Tax to pay. For most estates there is no tax to pay and you’ll only need to complete form IHT205(2011) to give brief details of the estate.

If there is tax to pay, or if the affairs of the deceased do not meet certain conditions, you’ll have to provide a formal account of the estate by filling in form IHT400: Inheritance Tax account and sending it to us. HMRC’s guidance, How to value an estate for Inheritance Tax and report its value will help you decide which form to fill in.

You may also be required to complete forms for the probate service, in addition to the Inheritance Tax forms, to apply for a grant of representation.

Where to start

In most estates, matters are very straightforward. Form IHT205(2011), together with these notes, will help you to get things right. It’ll help if you keep the form in front of you when you go through the notes so you can see which part of the form we’re referring to. The following points to remember refer to the information at the top of form (before section 1).

Points to remember

Using the right form

You can use form IHT205(2011) provided that the deceased was domiciled in the United Kingdom (UK) and there is no tax to pay because the gross value of the estate is less than or equal to:

• the excepted estate limit
• twice the excepted estate limit and you’re claiming a transfer of unused nil rate band on form IHT217: claim to transfer unused nil rate band for excepted estates from the estate of a spouse or civil partner who died before
• £1 million and all or part of the estate passes to the deceased’s spouse or civil partner, a qualifying charity or other UK national body

As you go through the form you may find that other conditions arise that mean you must stop and complete form IHT400: Inheritance Tax account instead. But provided these initial conditions are met, you should start with form IHT205(2011).

If you’re completing form IHT205(2011), you do not need to complete form IHT421: Probate summary.

Gross value

The gross value of the estate for Inheritance Tax is the total of all the assets that make up the deceased’s estate before any of their debts are taken off, plus any gifts made by the deceased.

Estate

For Inheritance Tax purposes, a person’s estate is made up of:

• assets in the sole name of the deceased
• their share of any jointly owned assets
• nominated assets
• assets they’ve given away, but kept an interest in
• assets from which they benefit, where they’ve elected not to pay the Income Tax charge
• assets in certain types of trust, in which the deceased had a right to benefit

The total of these assets is added to the chargeable value of any lifetime gifts made in the 7 years before death, to calculate the amount on which tax is charged. The chargeable value of gifts is the value of the gift after any exemptions are taken off.

The excepted estate limit

The excepted estate limit is normally the same as the amount above which Inheritance Tax is payable (the Inheritance Tax threshold or nil rate band).

The Inheritance Tax nil rate bands are:

• £285,000 for tax year 2006 to 2007
• £300,000 for tax year 2007 to 2008
• £312,000 for tax year 2008 to 2009
• £325,000 for the tax years 2009 to 2022

Check HMRC’s guidance How Inheritance Tax works: thresholds, rules and allowances for the most up to date excepted estate limit.

Domiciled

Your domicile is the country where you intend to live for the remainder of your life. It’s the country whose laws decide, for example, whether a will is valid, or how the estate of a person who has not made a will is dealt with when they die.

If someone was born in the UK, lived here for most of their life, or moved here permanently many years ago it’s a good indication they might be domiciled in the UK. However this can be a complicated legal issue and if you’re unsure about the deceased’s domicile status, you can seek professional advice. For more information about domicile, see HMRC’s guidance Inheritance Tax: Double Taxation Relief.

Transfers of unused nil rate band from the estate of a spouse or civil partner who died before

Since October 9 2007, it’s been possible for spouses and civil partners to transfer their unused nil rate band. This means that any part of the nil rate band that was not used when the first spouse or civil partner died can be transferred to the surviving spouse or civil partner for use by their estate on their death.

You must complete a claim to transfer the nil rate band using

form IHT217: Claim to transfer unused nil rate band for excepted estates

The following must apply:

• the person who has died now, died on or after 6 April 2010
• their spouse or civil partner who died before them died on or after 13 November 1974
• when the spouse or civil partner died their estate did not use up any of the nil rate band available, so the whole nil rate band is available to transfer
• the estate of the person who has died now is valued at less than twice the excepted estate limit and you are completing form IHT205

If the whole of the nil rate band is available to transfer, it means the estate of the spouse or civil partner who dies second has double the nil rate band before any Inheritance Tax becomes payable.

Example of when the whole nil rate band available to transfer

Ralph died leaving a widow, Rita. All of Ralph’s estate, valued at £300,000, passed to Rita under the terms of Ralph’s will. As everything that passes to a surviving spouse or civil partner is exempt from Inheritance Tax, all the nil rate band is available to transfer to Rita’s estate when she dies.

Example of when the whole nil rate band is not available to transfer

Morag died on 1 May 2008 (when the nil rate band was £312,000) leaving a surviving civil partner, Alison. Morag’s estate was valued at £400,000. In her will Morag:

• left £100,000 to her daughter Gemma
• the rest of her estate to Alison

Alison has now died leaving her estate valued at £500,000 to Gemma. Because the £100,000 that passed to Gemma on Morag’s death was not exempt from Inheritance Tax, £100,000 of the Inheritance Tax nil rate band (£325,000 in 2011 to 2012) was used up.

If you want to transfer the unused nil rate band and the whole nil rate band is not available, you cannot use form IHT205. Instead, complete form IHT400: Inheritance Tax account and form IHT402: Claim to transfer unused nil rate band instead.

Assets passing to a spouse or civil partner or to a qualifying charity

Why it matters whether the estate passes to the spouse or civil partner or to a qualifying charity

Broadly, assets that pass to the deceased’s spouse or civil partner or to a qualifying charity are exempt from Inheritance Tax. So if most of the assets pass to the deceased’s spouse or civil partner, or to a qualifying charity, it’s likely there will be no tax to pay. If there is no tax to pay because of these exemptions, and the estate meets the other conditions that apply, mainly that the gross value is £1 million or less, you do not have to complete an IHT400. But there are some restrictions to these exemptions.

What is meant by qualifying charity

By qualifying charity, we mean a charity established in the European Union (or other specified country) which:

• would qualify as a charity under the law of England and Wales
• is regulated as a charity in the country of establishment (if appropriate)
• has managers who are fit and proper persons to be managers of the charity

Other qualifying bodies

Other qualifying bodies include UK national organisations such as the National Trust and National Gallery. If you’re not sure if an organisation is a qualifying charity or UK national body, contact the Inheritance Tax helpline on: 0300 123 1072.

Assets which pass to a qualifying charity

Assets that pass to a qualifying charity are exempt from Inheritance Tax. The legacy must pass directly and unconditionally to the organisation. It must not pass into a trust for the benefit of the organisation concerned.

Assets which pass to the spouse or civil partner

Where assets pass to the deceased’s spouse or civil partner, both the deceased and their spouse or civil partner must have been domiciled (had their permanent home) in the UK throughout their lives.

If either of them did not and the gross estate (the figure in box H) is likely to be more than the excepted estate limit, do not complete form IHT205(2011) . You’ll need to complete form IHT400: Inheritance Tax account instead. For more information about domicile, see HMRC’s guidance Inheritance Tax: Double Taxation Relief. It does not matter whether the assets pass directly to the spouse or civil partner, or whether they pass to a trust from which the spouse or civil partner is entitled to benefit

Jointly owned assets

Bank and building society accounts, stocks and shares and houses and land are the assets most usually owned in joint names. If the deceased owned any assets jointly with another person (or people) you must include a value on the form for the deceased’s share of the assets in the estate. Where assets are owned jointly by 2 or more people, the way in which those assets are owned makes a difference for probate and which box you use to enter the value on the form.

The 2 types of ownership are:

• joint tenants
• tenants in common

Joint tenants

If the deceased held an asset with someone else, and their share passes automatically to the other joint owner, this is called a joint asset. The joint owners are known as joint tenants. Joint bank accounts are usually owned in this way. You should work out the value of the deceased’s share in a joint asset by dividing the value of the whole asset by the number of joint owners. Include this value in box 9.2. You should also refer to the Valuing joint bank accounts section of these notes.

Tenants in common

The joint owners hold the asset as tenants in common if the deceased:

• held an asset with someone else
• their share passes under their will (or if they did not make a will, under the rules of intestacy) to the other joint owner or to someone else

The deceased’s share is usually in proportion to the money they contributed to buy the asset or the amount they put into a joint account. You should:

• list each asset held as tenants in common in box 13
• give the value of the whole of the asset
• state the deceased’s share, for example, half, third, and so on

You should then include the value of the deceased’s share of an asset owned as tenants in common in the relevant box in section 11. So, if the asset held as tenants in common was the deceased’s house, include it in box 11.8 and so on. If the asset was not in the UK include it in box 9.5.

How to find out if a jointly owned asset is owned as joint tenants or tenants in common

If the asset is a house or land, the Land Registry documents may be able to help. You can get a copy of the title register for the property from the Land Registry website. The names of all the joint owners will be given on the title register. If it’s held as tenants in common that should be shown by the addition of a restriction on the Land Registry document known as a Form A restriction.

The Form A restriction will be in the following words (or similar):

No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises, is to be registered unless authorised by an order of the court.

The Land Registry document will not say what share of the property was owned by each owner. To find out the share owned by each owner you’ll need to look at either:

• the declaration of trust document
• the will by which it was inherited (if the property was inherited jointly)

Jointly owned bank accounts

Most joint bank accounts in England and Wales are held as joint tenants. If you want to check this, contact the banks and they should be able to tell you.

Other jointly owned assets

If any asset is purchased by 2 or more people together, the asset will be automatically owned as joint tenants unless the owners direct otherwise. There should be some documents that show that a particular asset is held as tenants in common.

Why it makes a difference how jointly owned assets are held

The deceased’s share of jointly owned assets, either as joint tenants or tenants in common, are included in the value of the estate for Inheritance Tax purposes. But if the joint ownership was as joint tenants (most joint bank accounts and many houses are owned as joint tenants) the assets pass automatically to the other joint owner(s). This means the value of these assets is not included in the value of the estate for the grant of probate or letters of administration. This means the deceased’s share of these assets is not required.

If the joint ownership was as tenants in common, the value of the deceased’s share must be shown on the grant of probate or letters of administration. This means the deceased’s share of these assets is required.

What you should do first

Make a thorough search of all the deceased’s papers. Make a rough list of their assets, investments, their other financial interests and the debts they owed when they died. If the deceased had to complete Self Assessment tax returns, they may have kept records and these may help. Bank statements and building society passbooks may help you to discover whether any gifts were made. Remember that although the income from certain assets such as ISAs is not liable to Income Tax, both the capital and the income are liable to Inheritance Tax and must be included.

You may also find it useful to ask others what they knew of the deceased’s financial affairs. People who might be able to help are:

• any solicitor or accountant who dealt with the deceased’s affairs
• the deceased’s close family (especially to discover gifts)
• anyone named in the will who might know about the deceased’s affairs
• any close business associates of the deceased
• the deceased’s bank, stockbrokers or other financial advisers (the bank may have other papers or valuables lodged with them for safekeeping)

You should make detailed enquiries to find everything that makes up the deceased’s estate. When you’ve completed your rough list of assets, you should find out the value of each asset. It’s very important you provide full and accurate information and try to value the assets correctly. If the values or information you provide are incorrect, incomplete or false you may receive a financial penalty.

What to do when you’ve got the assets and the values sorted out

When you have a good idea about the assets that make up the estate, and their values, add up the figures. If the gross value of all the assets, when added to the chargeable value of any gifts the deceased made, is less than or equal to £1 million, you may continue to complete form IHT205(2011). Do not continue with form IHT205(2011) if the gross value:

• is more than £1 million
• is more than the excepted estate limit (or twice the excepted estate limit where you’re claiming a transfer of unused nil rate band) and no assets pass to the deceased’s spouse or civil partner or to a qualifying charity

You should complete form IHT400: Inheritance Tax account instead.

Valuing assets

How to value all the assets

For Inheritance Tax purposes, you have to value all the assets as if each item had been sold on the open market on the date the person died. This is called the open market value. It represents the realistic selling price of an asset, not an insurance value or replacement value.

You should be able to value some of the estate assets quite easily, for example, money in bank accounts, stocks and shares. In other instances, for example, houses and land, you’ll probably need the help of a professional valuer. When you employ a valuer, make sure you ask them to give you the open market value of the asset. There is more detailed help about valuing different types of assets later in this guidance.

Valuing assets owned jointly

It does not matter whether the assets are owned as joint tenants, or as tenants in common, the starting point in valuing the deceased’s share is their share of the whole value. For example, if 3 people contributed equally to a bank account with £900 in it and it was held as joint tenants, the deceased’s share will be £300 and that should be entered in box 9.2. But there are some special rules about valuing other types of asset.

Valuing a share in houses, buildings and land

If the deceased owned houses, land and buildings with other people you should start by working out the value of the deceased’s share. If the other joint owner is not the deceased’s spouse or civil partner, you can reduce the value of the deceased’s share by 10%. But if the house, land or building is wholly owned by husband and wife or civil partners, special rules apply and you should not reduce the deceased’s share by 10%.

Valuing joint insurance policies

If the deceased owned an insurance policy jointly with someone else, you should include the deceased’s share of the policy as a joint asset in box 9.2. If the policy is known as a joint life and survivor policy, you should still include the deceased’s share of the policy. The insurance company should be able to give you an estimate for the value of the whole policy at the date of death, so you can work out the value of the deceased’s share.

Valuing joint bank accounts

Valuing the deceased’s share of a bank account is quite easy, but sometimes an account may be held in joint names just for convenience. For example, if an elderly person can no longer get out, they may add a son’s or daughter’s name to their bank account so the son or daughter can operate the account for them. If an account is in joint names for convenience and the deceased provided all the money in the account, you should treat the account as if it was in the deceased’s sole name. Include the full balance of the account in box 9.2 (for joint tenants) or 11.1 (if the account was held as tenants in common).

The opposite also applies. If the deceased did not provide any of the money in the account and their name was on it for convenience only, then, so long as the provider did not intend to make a gift, there is no need to include anything about the joint account on form IHT205(2011).

Estimating values and small estates

What to do if you cannot get an accurate value

If you do not know the exact amount or value of any small item, such as an Income Tax refund or household bill, do not put off applying for the grant. You may use an estimated figure. You should not guess at a value, but try to work out an estimate based on the information available. If you do include an estimate, use box 13 to tell us which values are estimates.

Accurate values are not needed when the estate is very small

If the gross value of the estate is likely to be below £250,000, or the estate is exempt because it’s passing to a spouse or civil partner or to a qualifying charity, you can estimate the value of the assets. You should not guess at a value, but try to work out an estimate based on the information available to you. There is no need to use box 13 to show the figures are estimates in such estates.

Completing form IHT205(2011)

Section 1: About the person who has died

Complete boxes 1.1 to 1.7 of form IHT205(2011) giving the name, date of death and other information that we ask for about the deceased.

Box 1.5

For marital or civil partnership status, please select the appropriate status.

Box 1.6

Say what the deceased’s occupation was and whether or not they were retired. For example, builder, retired teacher.

Box 1.7

You can find the deceased’s National Insurance number on: letters from HMRC or the Department of Work and Pensions, or on a P60 End of Year Certificate. If the deceased had benefits paid directly into their bank account, their National Insurance number will appear in the bank statement.

About the estate

Section 2: Gifts and transfers

If the deceased made any gifts (or other transfers of assets) during their lifetime, you must take these into account to find out if the estate qualifies as an excepted estate. You must start with all gifts and transfers that the deceased made, even those made to their spouse or civil partner or to a qualifying charity.

What counts as a gift

Gifts are transfers of money (or other assets) made by the deceased during their lifetime. Gifts do not include bequests and legacies made in the deceased’s will. For example, if (whilst alive) the deceased gave their son £8,000 to buy a car, that is a gift. If the deceased’s will says: “I give £8,000 to my son” that is a legacy under the will, not a gift.

A gift or transfer is relevant for Inheritance Tax if, having made the gift or transfer, the value of the deceased’s estate decreased. This includes straightforward cash gifts or a gift of a particular asset. Other transactions such as the sale of a house for less than its full market value, or a gift of shares resulting in the deceased losing control of a company are also relevant. If you’re not sure how a transaction affects Inheritance Tax, please contact our helpline for advice.

Section 2: first part

Answer No if the gifts the deceased made did not exceed £3,000 each year. You can ignore gifts in consideration of marriage or civil partnership if they fall within the limits listed in The Gifts on marriage or civil partnership section of these notes.

Allowable exemptions

If the deceased made gifts (or other transfers) exceeding £3,000 in any one year, you can deduct certain allowable exemptions from the gifts. The only exemptions you can deduct to find out if the estate qualifies as an excepted estate are:

• small gift exemption
• annual exemption
• exemption on gifts made in consideration of marriage or civil partnership
• exemption for gifts made as normal expenditure out of income — provided the total value of gifts out of income is under £3,000 for each tax year

You can still answer No to this question if the only gifts the deceased made:

• were all made to individuals more than 7 years before the death
• were fully covered by the exemptions

Section 2: second part

If you answer Yes, then the deceased is treated as if they’d made a transfer or gift of the trust assets in which their right to benefit ceased. This means the trust assets must conform to the rules that apply to gifts. They should be added to any other gifts or transfers the deceased made themselves. See section 4 of this guidance for more information about what a trust is for Inheritance Tax purposes.

Specified transfers

If you answer Yes to either part of section 2, the gifts and transfers must qualify as specified transfers. To qualify as specified transfers the assets given away can only be:

• cash
• listed stocks and shares
• household and personal goods
• houses, land and buildings

The total value of the gifts at the time the gifts were made, after taking away any exemptions that are allowable, must be less than or equal to £150,000.

Include the value of all the gifts and transfers in box 9.1. If the transfer arose because the deceased gave up their right to benefit from a trust, enter the name of the person who set up the trust and the date it was set up in box 13.

Gifts of houses, land or buildings

Gifts of houses, land or buildings only qualify as specified transfers if they were outright gifts from one individual to another.

Stop filling in form IHT205(2011) now and complete form IHT400: Inheritance Tax account instead, if:

• gifts of houses, land or buildings were to a trust, or the deceased kept back any kind of benefit from the property or was entitled to use the property
• the assets given away were not of the type listed above
• the value of all the gifts and transfers in box 9.1, after deducting the allowable exemptions, is more than £150,000

If the value is more than £150,000 because the deceased made gifts that are exempt you, can continue to complete form IHT205(2011) and enter a value greater than £150,000 in box 9.1. There is a list of exempt gifts in the Other exemptions section of these notes. See the Gifts made out of income section for examples that explain this rule.

Allowable exemptions that can be deducted

You can deduct certain exemptions from any gifts or lifetime transfers made by the deceased. If all the gifts or lifetime transfers meet the conditions for the exemptions and the total of all gifts is less than the cash limits given, you can still answer No to both parts of section 2.

Small gift exemption

Gifts to any one person which do not exceed £250 in any one tax year to 5 April are exempt. This exemption covers gifts at birthdays and other festive occasions. You cannot use small gift exemption in conjunction with any other exemption. This exemption can only be used if all the gifts made to the same person in one tax year do not exceed £250 in total.

Annual exemption

Gifts not exceeding £3,000 in any one tax year to 5 April are exempt. This can apply to one gift, or the total of a number of gifts to which the small gift exemption does not apply. If the gifts made in one year fall short of £3,000, any surplus can be carried forward to the next year (but no further) and can be used once the exemption for that year has been used up in full. The exemption cannot be carried back to earlier years.

Gifts made out of income

Gifts that are made as part of the deceased’s normal expenditure are exempt from Inheritance Tax, provided you can show that they:

• formed part of the deceased’s normal expenditure
• were made out of income
• left the deceased with sufficient income to maintain their normal standard of living

Normal expenditure

This means that the payments were a regular part of the deceased’s expenditure. For example, where the deceased was making a monthly or other regular payment to someone else. A one-off payment, even if it was out of income, will not be exempt.

Answer No to both parts of question 2 if the deceased made any gifts out of income and:

• they meet these conditions
• do not exceed £3,000 in total each year

Answer Yes to the first part of question 2 and give details of the gifts in box 9.1 if the gifts made out of income are more than £3,000 per year.

Where the deceased made gifts out of income that exceed £3,000 per year, do not deduct the exemption for the years concerned. The full value of the gift must be added to all the other gifts in box 9.1 to arrive at the total value for gifts. Do not continue to complete any more of form IHT205(2011) if this calculation means:

• the total for gifts exceeds £150,000
• the gross estate is more than the excepted estate limit (or twice the excepted estate limit where you’re claiming a transfer of unused nil rate band) and no assets pass to the deceased’s spouse or civil partner or to a qualifying charity

You’ll need to complete form IHT400: Inheritance Tax account instead.

Example 1

Jamie died on 3 May 2011. They:

• made gifts out of income to their grandchildren; these totalled £5,000 for each of the 3 tax years before they died
• made annual gifts to their children totalling £3,000 for each of those years
• left an estate of £320,000 to their unmarried partner

The gifts total £24,000. Annual exemptions total £9,000 (£3,000 for each tax year). This means there is a chargeable value of £15,000.

Because the gifts out of income exceed £3,000 each year, the full value of the gifts must be entered in box 9.1. For the purposes of determining if the estate is an excepted estate, no exemptions for gifts out of income can be deducted from the value of the gifts.

This means:

• the gross value for Inheritance Tax is £335,000, (£15,000 gifts plus £320,000 estate)
• this estate does not qualify as an excepted estate because it exceeds the excepted estates limit of £325,000
• form IHT400: Inheritance Tax account must be completed instead of form IHT205(2011)

Example 2

Alice, a widow, died on 9 April 2011. She:

• made gifts out of income to her nephews totalling £10,000 for each of the 6 tax years before she died
• left an estate of £500,000 to her sister

Alice’s husband died before her and left:

• all his estate to Alice
• his Inheritance Tax nil rate band unused

This means Alice’s estate can claim a transfer of unused nil rate band. This doubles the amount of nil rate band available.

The chargeable value of the gifts out of income is £60,000. This is under the £150,000 limit for gifts. When the gifts are added to the estate of £500,000, the gross value for Inheritance Tax is £560,000.

In this case, it does not exceed the excepted estate limit. This is because Alice’s estate is claiming a transfer of unused nil rate band from her husband’s estate and they can double the limit of £325,000. This means the excepted estate limit is £650,000

For more information, see Transfers of unused nil rate band from the estate of a spouse or civil partner later in this guidance.

Gifts on marriage or civil partnership

The gift will be exempt up to the limits below if it was made:

• on or shortly before the marriage or civil partnership ceremony
• to one or both parties to the marriage or civil partnership
• to become fully effective on the marriage or civil partnership taking place

The limits are:

• £5,000 if the deceased was a parent or step-parent of one of the parties to the marriage or civil partnership
• £2,500 if the deceased was a grandparent or more remote relative of one of the parties to the marriage or civil partnership
• £1,000 in any other case

Other exemptions that cannot be deducted when calculating the gross estate

There are other exemptions that are available. These are exemptions for transfers to:

• the deceased’s spouse or civil partner
• qualifying charities
• political parties, housing associations, maintenance funds for historic buildings, and employee trusts.

You should not deduct these at this stage to establish whether the overall limit for the gross estate of £1 million is exceeded.

Example 1

The deceased made lifetime gifts totalling £100,000 to their children and £100,000 to their wife in the year before they died. They died leaving an estate of £500,000.

The gifts total £200,000 minus annual exemption of £6,000 (previous year’s unused). The spouse or civil partner exemption is £100,000. This means the chargeable value of the gifts is £94,000.

Because the chargeable value is under the £150,000 limit for gifts, the estate can qualify as an excepted estate.

However, when completing form IHT205(2011), the family should ignore the spouse or civil partner exemption and write the value of £194,000 in box 9.1. When this is added to the estate on death of £500,000, the gross value does not exceed £1 million. This means the estate can still qualify as an excepted estate

Example 2

The deceased made gifts of £50,000 to their children and £50,000 to a qualifying charity. They died leaving an estate of £950,000.

The chargeable value of the gifts is £44,000. The family should not deduct the charity exemption and write £94,000 in box 9.1. When this is added to the estate on death of £950,000, the gross value exceeds £1 million. This means the estate does not qualify as an excepted estate, even though the chargeable value for gifts is less than £150,000.

Example 3

The deceased made lifetime gifts of £170,000 to their children and £50,000 to a qualifying charity. They died leaving an estate of £600,000.

The chargeable value of the gifts is £164,000. Because this exceeds the £150,000 limit for gifts, the estate cannot qualify as an excepted estate — even though, when adding back charity exemption to give a total of £214,000 and adding this to the estate on death of £600,000, the gross value does not exceed £1 million.

Gifts made more than 7 years before the death

In most cases, you can ignore gifts and transfers that were made more than 7 years before the death. But you should not ignore gifts or transfers where:

• the deceased kept back some benefit or interest in the assets given away, or was entitled to use the assets given away (in this case answer yes to the first 2 parts of the question);
• the deceased made a gift or transfer within 7 years of death, and within 7 years of that gift the deceased transferred assets to a discretionary trust or to a company

In the second situation, you do not need to tell us about the gift or transfer made by the deceased more than 7 years ago. But the person who received that gift or transfer may have a separate liability to Inheritance Tax. If you’re aware these circumstances apply, we recommend that the person who received the gift or transfer should contact the helpline to discuss their circumstances.

Section 3: Gifts with reservation of benefit

Section 3: first and second parts

A gift is known as a gift with reservation of benefit if the deceased made a gift where they:

• kept back a benefit of any kind in the assets given away
• are entitled to continue to use the assets given away or the person receiving the assets has not taken full and exclusive ownership of them

A common example is when someone gives their house to someone else, often their child, but continues to live in the house. If the asset given away was a house, and either the deceased or their spouse or civil partner continued to benefit from, or have use of, the property through a lease or trust or similar right or arrangement, the gift may be treated as a gift with reservation.

If anything like this applies to the deceased, and you’re not sure whether the arrangements should be treated as a gift with reservation, contact our helpline. Depending on the complexity of the arrangements, we may not be able to give a definitive answer over the phone. In these circumstances we recommend that you answer Yes to the first part of question 3.

Section 3: third part

In the 2005 to 2006 tax year, an Income Tax charge on preowned assets was introduced. This charge generally applies to assets that a person disposed of, but continued to get benefit or enjoyment from. It can also apply when a person contributed to the purchase of an asset for another person that they subsequently obtained benefit or enjoyment from.

Under the reservation of benefit rules, the legislation allows an individual to elect that the assets in question are treated as part of their estate for Inheritance Tax purposes. As long as the election remained in place, that person would not have to pay the Income Tax. To make this election, the deceased must have submitted form IHT500: Election for Inheritance Tax to apply to asset previously owned. It’s not possible for an election to be made on the deceased’s behalf, after death.

Answer Yes if the deceased received benefit from a preowned asset and elected to pay the Inheritance Tax charge, under the reservation of benefit rules, rather than pay the pre-owned assets Income Tax charge.

Answer No if the deceased received benefit from a preowned asset and paid the preowned assets Income Tax charge, or if the deceased did not dispose of (or contribute to) the purchase of any assets in this way.

If you answer Yes to any part of question 3, stop filling in form IHT205(2011) and complete form IHT400: Inheritance Tax account instead.

Section 4: Assets held in trust

A trust is an obligation binding a person who legally owns the assets (the trustee) to deal with the assets for the benefit of someone else. A trust might be in the form of a trust deed or set up by a will.

Interests in possession

Assets that are held in trust are called settled property. The deceased had an interest in possession in settled property where they had a right to:

• the income from assets (for example, dividends from shares, interest from a bank account or rent from a let property)
• payments of a fixed amount each year, often in regular instalments
• live in a house or use the contents without paying any rent

When someone has a right to live in a house this can have the same effect as a trust for Inheritance Tax, even if the right to live in the house is not formally expressed as a trust for that person’s benefit. Often, this type of right arises under another person’s will and can apply whether or not the house is owned jointly. If the deceased did not own their home and was not a tenant either, they may have been living there under this sort of arrangement. If so, you may need to include the value of the deceased’s home on form IHT205(2011). For more information see HMRC’s guidance How Inheritance Tax works: thresholds, rules and allowances or call the Inheritance Tax helpline on: 0300 123 1072.

In some circumstances, where a person has an interest in possession (or is treated as having an interest in possession) in settled property that person is treated as if they owned those assets personally for Inheritance Tax purposes. Answer Yes to question 4 if the deceased’s interest in possession began:

• before 22 March 2006
• on or after 22 March 2006 and was
  • an immediate post-death interest
  • a disabled person’s interest
  • a transitional serial interest

Immediate post-death interest

An immediate post-death interest is where the deceased was entitled to benefit from assets held in a trust that meets the following conditions:

• the trust was set up under a will or intestacy
• the deceased became entitled to the interest in possession on the death of the person whose assets passed into the trust
• the trust was never for a bereaved minor or a disabled person

Disabled person’s interest

A disabled person’s interest is where:

• a trust was set up after 29 March 1981 and, during their life, a disabled person benefited from not less than half the assets applied and nobody had a right to benefit from the trust
• a trust for the benefit of a disabled person (under which they have a right to benefit) is set up on or after 22 March 2006
• an individual who has a condition likely to lead to them becoming a disabled person sets up a trust, for their own benefit, on or after 22 March 2006

For these purposes the definition of a disabled person is a person who:

• is incapable, by reason of mental disorder (within the meaning of the Mental Health Act 1983), of administering their property or managing their affairs
• is in receipt of Attendance Allowance (under section 64 of either the Social Security Contributions and Benefits Act 1992 or the Social Security Contributions and Benefits (Northern Ireland) Act 1992) or would be if they were not undergoing certain treatments or met the residence qualifications
• is in receipt of Disability Living Allowance, at the highest or middle rate (under section 71 of either the Social Security Contributions and Benefits Act 1992 or the Social Security Contributions and Benefits (Northern Ireland) Act 1992) or would be if they were not provided with certain living accommodation or if they met the residence qualifications

The following new rules apply to trusts arising on or after 8 April 2013. All (previously more than half) the assets including income must now be applied for the benefit of the disabled person except for an annual limit of up to £3,000 (or 3% of the assets if lower) which may be applied for the benefit of others.

A disabled person now includes a person who receives:

• a Personal Independence Allowance or would do so if it were not for exclusions for nursing home residents, those receiving in-patient care and for prisoners
• an increased Disablement Pension or would do so if it were not for the exclusions stated above in relation to Attendance Allowance
• constant Attendance Allowance or would do so but for maintenance in a hospital
• an Armed Forces Independence Payment or would do so but for admission to the Royal Hospital, Chelsea

For gifts made to trusts in existence before 8 April 2013 (or arising after that under a will in existence before that date) the trusts are not prevented from qualifying as a disabled person’s interest by the new rules so long — as those trusts or wills are not altered on or after 8 April 2013. See HMRC’s Inheritance Tax Manual, IHTM 42805: trusts for disabled persons for more information.

Transitional serial interest

There are 2 main types of transitional serial interest. The first is where:

• the deceased has an interest in possession in settled property (a trust)
• the assets comprising the current trust were previously subject to another interest in possession trust that was set up before 22 March 2006
• the deceased’s interest arose between 22 March 2006 and 5 April 2008, inclusive

The second type arises where:

• the deceased had an interest in possession which arose on the death, on or after 22 March 2006, of the holder of a previous interest in possession
• the new holder is the spouse or civil partner of the previous holder

If the deceased had the right to benefit from more than one trust, or the value of the assets in a single trust was more than £150,000, stop filling in form IHT205(2011) now . You’ll need to complete form IHT400: Inheritance Tax account instead.

Foreign trusts

In deciding how to answer question 4, it does not matter whether the trustees are resident in the UK or abroad. You must take into account all the trusts treated as part of the deceased’s estate, in which the deceased had a right to benefit.

Trust assets passing to the deceased’s spouse or civil partner or a qualifying charity

Trust assets which qualify for spouse or civil partner or charity exemption should be excluded when applying the £150,000 limit. Enter the exemption you’re deducting for the trusts’ assets in box 14.

Section 5: Did the deceased own or benefit from any assets outside the UK?

Inheritance Tax is charged on the worldwide assets of someone who is domiciled (has their permanent home) in the UK. It includes any overseas assets they owned. The Isle of Man and the Channel Islands are not part of the UK. Enter the sterling value of any overseas assets in box 9.5.

If the answer is Yes and the gross value of the overseas assets is more than £100,000, stop filling in form IHT205(2011). You’ll need to complete form IHT400: Inheritance Tax account instead.

The £100,000 limit applies to the estate as a whole. To ensure the limit of £100,000 is not exceeded, you’ll need to add together:

• any foreign assets that the deceased owned in their own name
• their share of any jointly owned foreign assets
• any foreign assets held in a trust

Where the deceased owned foreign assets, you may also need to take out a separate grant in the country where the assets are, so you can deal with them.

Section 6: Insurance premiums

If the deceased was paying insurance premiums on a policy that will pay out to someone else, you may need to take the premiums paid into account as gifts. Answer No to this question if the policy was for the benefit of the deceased’s spouse or civil partner.

Where the deceased was paying premiums on an insurance policy for the benefit of someone else, you can answer No if:

• the insurance policy is not held in trust
• the premiums paid each year are covered by the exemption for regular gifts out of income (limited to £3,000 for each tax year)
• they did not buy an annuity at any time

If the insurance policy is not held in trust and the premiums are not covered by the exemption, then each premium is a gift of cash. You can answer No, but you must take the premiums into account in your answer to question 2. You can also answer No if:

• the insurance policy is held in trust (this will be the most common case)
• it was put into trust more than 7 years ago
• the premiums paid each year are covered by the exemption for regular gifts out of income
• they did not buy an annuity at any time

If the insurance policy is held in trust, and was put into trust more than 7 years ago, but the premiums are not covered by the exemption, then each premium is a gift of cash. You may answer No but you must take the premiums into account in your answer to question 2. In any other case, for example, where the policy was put into trust within 7 years of the death, or if the deceased both paid premiums on a life insurance policy that was not for their own benefit or paid out to the estate and they bought an annuity at any time, you must answer Yes to question 6 and stop filling in form IHT205(2011) now. You’ll need to complete form IHT400: Inheritance Tax account instead.

Section 7: Did the deceased have any kind of pension arrangement other than the State Pension?

Answer No if the deceased only had a State Pension and ignore question 8.

Pensions

Where someone has the benefit of a pension in addition to the State Pension, this additional pension will normally provide 2 types of benefit. These are:

• retirement benefits
• death benefits

It’s not possible to take both benefits. If the person reaches retirement age and takes their retirement benefits (a lump sum plus pension) the death benefit no longer applies. However, if they die before taking their retirement benefits, the death benefit is payable according to the pension scheme rules or the policy provisions. No retirement pension is paid.

Approved, unapproved and registered schemes

For Income Tax purposes, pension schemes and pension policies are approved, unapproved or registered. You need to find out which applied to the deceased’s scheme or policy. The scheme papers may provide this information. If they do not, the pension scheme provider should be able to tell you. HMRC cannot tell you what type of scheme it is.

Section 8: Did the deceased change or dispose of their pension in the 2 years before they died?

This is about the deceased’s pension arrangements as there are some circumstances where an Inheritance Tax charge can arise on pensions. Answer No and move on to question 9 if the deceased was drawing their retirement pension in full and had not made any arrangements to change their pension in the 2 years before they died, other than pensions paid to a spouse or civil partner.

Changing pension benefits

If the deceased was entitled to a pension (either from a pension scheme or a personal pension policy) and they had not taken their full retirement benefits by the time they died, you may need to take into account any changes they made to their pension benefits. You can ignore the State Pension in answering this question.

If the deceased was entitled to benefit from a pension scheme or pension policy and did not taken their full retirement benefits before they died, read the following guidance to decide how to answer section 8.

Transfer of pension entitlement

If the deceased did not take their full retirement benefit from a pension scheme or personal pension policy, any changes to the benefits they were entitled to may have given rise to a transfer of assets. Such a transfer is not a specified transfer so the estate cannot qualify as an excepted estate. This guidance only applies where any dealings with the pension benefits took place at a time when the deceased had been diagnosed with a terminal illness, or was in such poor health as to be uninsurable. Where any dealings took place at a time when the deceased was in normal health for their age, then even if they died shortly afterwards, you can answer No.

Disposing of pension benefits

A person disposes of the benefits payable under a pension scheme or pension policy where, for example, they put the death benefits into trust, or allocate some of their pension to someone else. If this disposal took place when the deceased had been diagnosed with a terminal illness, or was in such poor health as to be uninsurable, you should answer Yes.

A person can change the benefits to which they were entitled under a pension scheme or pension policy by:

• making additional contributions to the pension scheme or policy
• transferring their benefits from one pension scheme to another
• failing to take their pension on reaching pension age
• failing to request ill-health retirement where the deceased met the requirements for that form of retirement
• opting for income drawdown or making any changes to an income drawdown that has already been arranged
• opting for phased retirement or making changes to the number of segments taken where phased retirement has already been opted for

Income drawdown is a situation where the deceased has reached pension age, but has chosen not to use their retirement benefits to buy an annuity. Instead, they decide to draw a certain level of income from the pension funds with a view to buying an annuity at a later date.

Phased retirement is where the deceased has divided their pension entitlement into a series of segments and has agreed a plan with their pension provider to take so many segments each year on retirement.

If any such changes took place when the deceased had been diagnosed with a terminal illness, or was in such poor health as to be uninsurable, you should answer Yes and stop filling in form IHT205(2011) now. You’ll need to complete form IHT400: Inheritance Tax account instead.

Guaranteed pension payments

If the deceased was receiving a pension from a pension scheme or pension policy, the payments may have been guaranteed for a certain period of time. If the guarantee period ends after the death, the payments will continue to be made to the estate, and the right to receive those payments is an asset of the estate. If this applies to the deceased’s estate, include the value of the right to receive the payments in box 11.11.

You can use HMRC’s Inheritance Tax Annuity Calculator to work out the value of this right. You must use Adobe Reader version 9.0 or later to use the calculator. You can download latest version for free.

If you do not use the calculator, add up all the payments that still have to be made and take off 25% to give an estimated figure. You should ignore the (usually reduced or lower) pension that continues to be paid directly to the deceased’s surviving spouse or civil partner.

Lump sum payments

If the deceased dies before retirement or before taking their retirement benefits, a lump sum may be payable under the pension scheme or pension policy. A lump sum will be part of the deceased’s estate if:

• it’s payable to their personal representatives as of right or because no-one else qualifies for payment
• the deceased could direct who the lump sum was to be paid to by making a binding nomination/ instruction
• the deceased could manufacture a situation (for example, by revoking a nomination) so the lump sum would be payable to the estate
• it’s a refund of contributions

In each of these cases, the amount of the lump sum should be included in box 11.11. A lump sum will not be part of the deceased’s estate if the pension trustees are free to decide who it’s payable to (even if they do decide to pay the lump sum to the personal representatives). Similarly, any ex gratia payments (where the payer is not legally obliged to make the payment) paid to the estate are not part of the Inheritance Tax estate, as the deceased had no right to them.

You must take care to determine exactly how the lump sum is payable. If the deceased has completed a letter of wishes, the trustees may pay the lump sum in accordance with the letter. But even if that means the lump sum is paid to the estate, it’s not part of the deceased’s estate for Inheritance Tax. This is because the letter of wishes did not bind the trustees. Only if the lump sum was payable under a binding nomination should the lump sum be part of the estate, irrespective of who it’s paid to. If you decide a lump sum is not part of the estate, enter the name of the pension scheme and why you do not think it’s part of the estate in box 13. If you decide that the lump sum is part of the estate, include its value in box 11.11.

Deceased’s assets at the date of death

When you enter the value of assets or debts on the form, do not include pence. You should round assets down and debts up to the nearest pound. If you leave a box blank, we’ll assume the deceased did not own any assets of the type described. You must include all the assets that were part of the deceased’s estate as at the date of death.

Deeds of variation

If 2 people, for example husband and wife, die within a short period of time, it’s possible for the beneficiaries of the second person to die to alter the devolution of the estate of the first to die by executing a deed of variation within 2 years of that death. The effect is that they can redirect assets from the first estate away from the second estate. But redirecting assets in these circumstances only has effect for Inheritance Tax purposes. It does not alter the value of the second estate for probate purposes. The value of the second estate as at the date of death determines whether you complete form IHT205(2011), or form IHT400. Complete form IHT400: Inheritance Tax account if the gross value of the second estate, at the date of death, exceeds the excepted estate limit.

Deceased’s assets at the date of death

Section 9: Assets added to the estate for Inheritance Tax for which a grant of representation is not required

These are the assets the deceased owned, or benefited from, when they died, but are not included in the value of the estate for the grant of probate or letters of administration. The assets the deceased owned outright and the deceased’s share of any jointly owned assets owned as tenants in common which will be included in the value of the estate for the grant of probate or letters of administration, should be entered in section 11 of form IHT205(2011).

Assets not included in the value of the estate for the grant of probate or letters of administration (and for which a grant is not required), must be added to the estate for Inheritance Tax purposes. Enter these assets in boxes 9.1 to 9.5. Enter any debts to deduct against these assets in boxes 10.1 to 10.4. If the debts are more than the value of the corresponding assets, enter the total assets and debts in box 13 and enter nil in the relevant numbered boxes.

Box 9.1: Gifts

If your answer to question 2 was Yes, enter the total value of the gifts or other lifetime transfers made by the deceased, after taking off any:

• small gift exemption
• annual exemption
• exemption for gifts made on marriage or civil partnership you’ve deducted in this box
• exemption for gifts made out of income – for deaths on or after 1 March 2011 you can only deduct this exemption if the gifts total is less than £3,000 for each tax year

Enter any other exemptions you’re deducting from the gifts(for example, spouse or civil partner exemption or charity exemption) in box 14, not box 9.1. See HMRC’s guidance How Inheritance Tax works: thresholds, rules and allowances for more information on exemptions.

In the space provided, tell us:

• the date of the gift
• the name of the person who received the gift
• what was given away
• its value
• how you’ve deducted the exemptions

Use box 13 if you need more room to give details of gifts.

Box 9.2: Share of joint assets passing by survivorship

If the deceased owned any jointly owned assets passing automatically to the surviving joint owner by survivorship (joint tenancy):

• describe each joint asset
• enter the total value of the deceased’s share of these joint assets

If the joint property is a house, give the address. Use box 13 if you need more room to give details of joint assets. If the joint assets were owned by the deceased and their spouse or civil partner you must still include them in the appropriate box. Deduct any spouse or civil partner exemption at box 14.

Box 9.3: Assets held in trust

If your answer to question 4 was Yes, enter the gross value of the trust assets. If the trustees only give you one figure, that is after deduction of any debts, include that here instead. Enter the name of the person who set up the trust and the date it was set up.

Box 9.4: Nominated assets

If the deceased, during their lifetime, nominated an asset to pass to a particular person after their death, enter the value of that asset . The only assets that can be nominated in this way are:

• deposits in friendly societies and industrial and provident societies
• or, before 1 March 1981, National Savings certificates and accounts.

Legacies in the will are not nominated assets. Do not include nominated pension benefits here. See the Lump sum payments section of this guidance for more information.

Box 9.5: Assets outside the UK

Enter the value of assets outside the UK, plus the deceased’s share of any foreign assets that were owned jointly with someone else. The Channel Islands and the Isle of Man are outside the UK for Inheritance Tax purposes. You must:

• convert the value in the foreign currency to pound sterling
• make sure you use the conversion rate for the date of death

You use a newspaper or the internet to find conversion rates for most common currencies.

Box A: Gross value of assets for which a grant is not required

Enter the total of boxes 9.1 to 9.5.

Section 10: Debts payable out of assets totalled in box A

Deaths on or after 1 April 2014

You can only include debts that you expect to repay from the estate if both:

• the gross value of the estate is less than £1 million
• there is no tax to pay because part of the estate passes to the deceased’s spouse or civil partner

Do not include:

• debts you know are not going to be repaid from the estate
• any debts where the borrowed money was used to acquire excluded property (usually an interest in a trust where the trustees are abroad), or property that has become excluded property

These restrictions only apply where the deceased died on or after 1 April 2014.

Box 10.1: Share of mortgage on jointly owned property

Enter the deceased’s share of any outstanding mortgage secured on jointly owned property that is shown in box 9.2. If there was a joint mortgage protection policy, you should include the share of the mortgage in this box and the share of the money that the policy paid out in box 9.2.

Box 10.2: Share of other debts payable out of joint assets

Enter the deceased’s share of any other debts actually owed when they died that are payable out of jointly owned assets shown in box 9.2.

Box 10.3: Debts payable out of trust assets

Enter any debts payable out of trust assets. If the trustees only give you one figure for the trust assets, that is after deduction of any debts, enter that figure in box 9.3 and leave this box blank. If there are no assets in box 9.3 there will be no debts in box 10.3.

Box 10.4: Debts owing to persons outside the UK

Enter any debts which the deceased actually owed when they died and which were owed to someone who lived abroad.

Box B: Total debts payable out of assets in boxes 9.1 to 9.5

Enter the total of boxes 10.1 to 10.4 .

Box C: Net value of assets for which a grant is not required

Deduct the figure in box B from the figure in box A (A minus B). Enter the answer here.

Section 11: Deceased’s own assets for which a grant of representation is required

These are the assets included in the value of the estate for the grant of probate or letters of administration, even if you do not need to produce a copy of the grant to access these assets. Enter the gross value for both the deceased’s own assets and their share of any assets held as tenants in common (not passing automatically to the surviving joint owner) in this section.

If you’re including a share of an asset, such as a house, enter each item held as tenants in common in box 13 and include the value of the whole asset and the deceased’s share (e.g. half). You should then enter the value of the deceased’s share of an asset held as tenants in common in the relevant box in section 11.

Gross value

This means the value of the assets before deduction of any debt, relief or exemption. If you need to include an estimated value, see the Estimating values and small estates section of this guidance. Do not include joint assets which pass automatically to the surviving joint owner. Instead you should enter these in box 9.2. See the Jointly owned assets section of this guidance for more information.

Do not include pence when you enter the value of assets or debts. Instead, round assets down and debts up to the nearest pound. If you leave a box blank we’ll assume the deceased did not own any assets of the type described.

Box 11.1: Cash, money in banks, building societies and National Savings

Enter the total figure for all the money in bank and building society accounts, National Savings investments and cash when the person died. This will include:

• cash held by the deceased, kept at home or elsewhere, such as a safety deposit box
• money in current, deposit, high interest, fixed interest, term, bond and money market accounts
• accounts with supermarkets or insurance companies
• National Savings Bank accounts
• Premium Bonds
• cash in an ISA
• travellers’ cheques

The figure should include interest that was owed up to the date of death but was not actually paid into the account. You can get these figures from the bank or other organisation holding the account. National Savings investments include:

• National Savings Certificates
• National Savings Capital or Deposit Bonds
• National Savings Income Bonds
• Pensioners Guaranteed Income Bonds
• Children’s Bonus Bonds
• First Option Bonds
• Save As You Earn contracts
• Year Plans
• Premium Bonds, including unclaimed prizes

See The National Savings and Investments guidance: What to do if an NS&I customer has died for information about tracing the deceased’s investments.

Box 11.2: Household and personal goods

This means things such as furniture, pictures, paintings, china, TV, audio and video equipment, cameras, jewellery, cars, caravans, boats, antiques, stamp collections and so on. You do not have to get a professional valuation for ordinary household and personal goods where you can use publicly available data to estimate the value, for example, to value second hand cars.

If you estimate the value, you need to use the open market value at the date of death, not an insurance or replacement value. The open market value is the realistic selling price for the item. This is the price the item would have been likely to fetch if sold at auction or otherwise advertised publicly. If you think any item may be worth more than £1,500, or you’re not sure, we advise you to get a professional valuation. The value could be low, or even nil, provided that it’s honest.

Box 11.3: Stocks and shares quoted on the Stock Exchange

Include the following:

• UK government securities such as treasury stock, exchequer stock, convertible stock and consolidated stock
• all stocks, shares, debentures and other securities on a market that HMRC defines as listed (see Designated recognised stock exchanges)
• unit trusts
• investment trusts
• open-ended investment companies
• shares in an ISA
• any dividends due, but not paid before the death

If the deceased was an underwriter at Lloyds, enter their business portfolio of shares in box 11.7 not in box 11.3.

You do not need a professional valuation for listed stocks and shares. You can value shares quoted on the London Stock Exchange (or any other exchange) by finding the price of the shares in the financial pages of a newspaper or online.

Things to remember when pricing shares

You must use the value of the shares on the day the person died. Remember that newspapers printed on the date of death will have share prices for the day before. If the deceased died on a day when the Stock Exchange was closed, take the price for either the next or last day it was open. Whichever is the lower. For example, if the person died on a Sunday you can take the price for either the Monday after or the Friday before.

1. Make a list of all the shares, including the name, nominal value and type of shares, e.g. A N Other Plc 10p ordinary shares
2. Find the shareholding and write down the price given for each different shareholding (if 2 prices are shown for unit trusts, use the lower one).
3. Multiply the number of shares by the price given — this will give you the value of the shares.
4. Keep your shares list safe with the deceased’s papers and other records.

Example calculation

If the deceased held 1,250 shares and the price was 1,093.5p, the value for the holding is: 1,250 x 1,093.5p = £13,668.75.

Box 11.4: Stocks and shares not quoted on the Stock Exchange

Include the following:

• shares in a private family company which are not listed on a stock exchange
• shares traded on OFEX (an unregulated trading facility for dealing in unquoted shares)
• shares on a market that HMRC does not define as listed, including those which may be part of an ISA (see Designated recognised stock exchanges)

You should be able to find values for shares on unlisted markets online.

Pricing private company shares

Provide an estimate of the open market value of the shares. You may need to contact the company’s secretary or accountant to get this value. Do not include just the nominal value of such shares (for example the nominal value for 1,000 £1 ordinary shares is £1,000) unless that genuinely reflects your estimate of the open market value of the shares.

Pricing AIM or OFEX shares

You can value these shares in the same way as quoted stocks and shares.

Box 11.5: Insurance policies, including bonuses and mortgage protection policies

Enter the total value for:

• life insurance policies paying out to the estate, including any bonuses that are paid
• money paid under a mortgage protection policy (if the policy was in joint names, include the amount payable in box 9.2 instead)
• insurance policies held in ISAs
• payments received under investment schemes which pay 101% of the unit value on death
• payments received under investment or reinvestment plans, bonds or contracts with a financial services provider which pay out on death
• insurance policies on the life of another person but under which the deceased was to benefit

Box 11.6: Money owed to the person who has died

You should enter:

• money which the deceased had lent to someone else and which had not been repaid at the date of death
• money which the deceased had lent to trustees linked to a life insurance policy held in trust
• money for which the deceased held a promissory note or IOU
• money which the deceased had lent to someone and which is secured by a mortgage over property
• money owing to the deceased from a director’s loan account or current account with a company

Enter the face value of the loan, after deducting any repayments made. You should also include any interest due up to the date of death.

Box 11.7: Partnership and business interests

Enter the net value of all the deceased’s business interests. Ideally, accounts for the business should be prepared at death and it will be the total of the deceased’s capital and current accounts that will be the starting point. Remember that the value for capital assets in accounts is usually the book value, and this is often different from the open market value that is required for Inheritance Tax.

If the deceased was an underwriter at Lloyds, enter their business portfolio of shares here and not in box 11.3. Where necessary, increase (or decrease) the value of the business interests shown in the accounts to reflect any adjustments by replacing the book value with the open market value.

Box 11.8: Freehold/leasehold residence

Enter the open market value of the deceased’s share of a home owned or partly owned by the deceased unless it was held in joint names and passes automatically to the surviving joint owner. If the deceased had moved to a nursing or other residential care home shortly before they died and the property had been left vacant, you should still include it in this box.

If the property was let after the deceased moved out, enter the value in box 11.9. and not 11.8. Enter the address of the property, including the postcode, in the space provided. If the property is a farmhouse read the guidance for box 11.10. If the deceased’s home passes automatically to the surviving joint owner, do not include it here. Include the value at box 9.2 instead.

Valuing houses, land and buildings

Valuing houses, land and buildings can be complicated and you’re strongly advised to use a professional valuer. Ask the valuer:

• for the open market value, not the probate value (make sure you enter the open market value on the form)
• to take account of the state of repair of the property (which may decrease its value) and any features that might make it attractive to a builder or developer, such as large gardens, or access to other land that is suitable for development (which may increase its value)

If you get several valuations which give a range of values for the property, it’s best to enter a value between the highest and lowest values. If, before you apply for a grant, you find out about other information that casts doubt on your figure, you must reconsider it.

For example, you may have estimated that the property was worth £250,000. When you try to sell it you market it at £270,000 and receive some offers at that figure or more. This suggests that the open market value for the property may be closer to £270,000. In these circumstances we recommend that you ask the valuer to consider amending the valuation, taking into account factors such as the length of time since the death and movements in the property market.

Box 11.9: Other freehold/leasehold residential property

Enter the open market value of any other residential property owned by the deceased which was either let, or could be let, but was vacant when they died. See the guidance for box 11.8 for how you should value the property. Enter the address, including the postcode, in the space provided. You should include any rent due to the date of death in box 11.11.

Box 11.10: Other land and buildings

Enter details of any other land and buildings the deceased owned. This includes:

• farms (if the person who has died lived on a farm include the value of the whole farm here, do not include a separate value for the farmhouse in box 11.8)
• business property, for example, a hotel, shop, factory
• timber and woodlands
• other land and buildings such as lock-up garages, redundant or derelict land, quarries, airfields
• other rights that attach to land, such as fishing or shooting rights

See the guidance for box 11.8 for how you should value the property. We recommend that you get professional advice if the estate contains this sort of land as it can be very difficult to value. Enter the address or location of the property in the space provided.

Box 11.11: Any other assets

Enter any other assets owned by the deceased that are not included in boxes 11.1 to 11.10. Examples are:

• money owed in salary or wages
• arrears of pension or unclaimed benefits
• rents due for the period to death
• income due from a trust for the period to death
• refunds from private health schemes
• Income Tax or Capital Gains Tax repayments
• money or assets that are due to the deceased from the estate of someone else who died before them
• refunds from gas or electricity, insurances or licences

Box D: Gross value of assets for which a grant is required

Enter the total of boxes 11.1 to 11.11. If the value in box D is nil stop filling in form IHT205(2011) now. You’ll need to complete form IHT400: Inheritance Tax account instead.

Section 12: Debts payable out of assets shown in boxes 11.1 to 11.11

Deaths on or after 1 April 2014

You can only include debts that you expect to repay from the estate if:

• the gross value of the estate is less than £1 million
• there is no tax to pay because part of the estate passes to the deceased’s spouse or civil partner,

Do not include:

• debts that you know are not going to be repaid from the estate
• any debts where the borrowed money has been used to acquire excluded property (usually an interest in a trust where the trustees are abroad), or property that has become excluded property

These restrictions only apply where the deceased died on or after 1 April 2014.

Box 12.1: Funeral expenses

You may deduct funeral expenses and reasonable mourning costs. You may also deduct the cost of a headstone or plaque marking the site of the deceased’s grave. These expenses may also include a reasonable amount to cover the cost of:

• flowers
• refreshments provided for mourners after the service
• necessary expenses incurred by the executor or administrator in arranging the funeral

Write the total of these costs in this box. Allowable funeral costs do not include travelling or accommodation costs for the mourners. Leave this box blank if the deceased paid for a funeral plan that covered all the funeral costs.

Box 12.2: Mortgage or share of a mortgage on a property or land in boxes 11.8 to 11.10

Enter any mortgage secured on property you’ve included in section 11. If the deceased only owned a share of the property concerned, only include the same share of the mortgage.

For example, the deceased owned a half share of a house valued at £200,000. The property had a mortgage of £50,000 secured on it. The value of the deceased’s share of the property in box 11.8 is £100,000 and the value of the deceased’s share of the mortgage in box 12.2 is £25,000. If the deceased had a mortgage protection policy, enter the mortgage in this box and the money that the policy paid out in box 11.5.

Box 12.3: Other debts owed in the UK

Only enter debts which the deceased actually owed when they died. For example, household bills, uncleared cheques for goods and services provided before the death and credit card debts. Do not include fees for professional services carried out after the death, such as solicitors’ or estate agents’ fees and valuation fees.

If the person who died wrote a cheque to make a gift before they died and the cheque had not cleared by the death, you must not treat the cheque as a deduction. You must include the value for the deceased’s bank account without deducting the cheque. Do not enter the intended gift as a gift in question 2.

Box E: Total debts payable out of assets in boxes 11.1 to 11.11

Enter the total of boxes 12.1 to 12.3.

Box F: Net estate in the UK for the grant of representation

Deduct the figure in box E from the figure in box D (D minus E) and enter it here.

Box G: Net estate for Inheritance Tax purposes

Enter the total of boxes C and F.

Box H: Gross value for Inheritance Tax purposes

Enter the total of boxes A and D and write the answer in box H.

Stop filling in form IHT205(2011) now and use form IHT400: Inheritance Tax account instead if:

• the value in box H is more than the excepted estate limit (£325,000 for tax years 2011 to 2025 or £650,000 where you’re claiming a transfer of the unused nil rate band from the estate of a spouse or civil partner who died before)
• none of the assets pass to the deceased’s spouse or civil partner or to a qualifying charity

Read the guidance earlier in these notes for more information about transfers of unused nil rate band and assets passing to a spouse or civil partner or to a qualifying charity.

Section 13: Additional information

Use this space to provide any additional information referred to in this guidance or if you need more space for any reason. If you want us to take anything into account, write it here. You may continue on a separate sheet of paper if you do not have enough room, but make sure you write the deceased’s name and date of death on any extra sheets.

Section 14: Exemptions and box J

If the value in box H is less than, or equal to, the excepted estate limit (£325,000 for tax years 2011 to 2015):

• enter 0 in box J
• copy the value in box G to box K

You do not need to read the rest of this section. Go to the Box K section of this guidance.

If any of the assets pass to the deceased’s spouse or civil partner, a qualifying charity or other qualifying body, these assets are likely to be exempt from Inheritance Tax. Use the space provided in section 14 to describe the extent of the exemption, or list the specific assets that are entitled to exemption.

Box J

Enter the total value of all exemptions in box J.

Example 1

If the deceased’s will, or the rules of intestacy, say the whole estate passes to their spouse or civil partner, enter:

• this information
• the value from box G into box J (unless there are assets in section 9 which do not pass, or have not passed, to the spouse or civil partner, e.g. lifetime gifts )

Lifetime gifts would be an example

Example 2

If the deceased made lifetime gifts to their spouse or civil partner or to a qualifying charity:

• list the gifts and any exemption to be deducted from them, also show any exemptions to be deducted from the estate that passes on death
• add all the exemptions together and enter the total figure in box J

Example 3

If there are legacies of £30,000 to the children, with three-quarters of the remainder of the estate passing to the spouse or civil partner and one-quarter to the children:

• explain that the estate is to devolve in this way
• work out how much the spouse or civil partner is to receive
• enter that value in box J

Example 4

If the spouse or civil partner is to receive the household and personal goods and the deceased’s home, list these 2 items in this box and enter their total value in box J.

Example 5

If there are any legacies to qualifying charities, enter:

• the names of the organisations that benefit
• the total of all the legacies passing to a qualifying charity in box J

If there are too many legacies to different qualifying charities to list, just enter organisations receiving more than £25,000. For the rest, tell us how many other qualifying charities benefit and include one figure for the total of the smaller legacies.

Example 6

If there is a mixture of assets passing to the deceased’s spouse or civil partner and to qualifying charities:

• tell us as much as you can
• enter the total amount of exemption in box J.

Use box 13 if you need more room.

Box K

Deduct the value in box J from the value in box G (G minus J) and enter the answer here. This is the net qualifying value of the estate.

Net qualifying value for excepted estates

You can apply for a grant of representation without filling in form IHT400 if the value in box K:

• does not exceed the excepted estate limit (£325,000 for tax years 2011 to 2025)
• exceeds the excepted estate limit but does not exceed twice the excepted estate limit (£650,000 for tax years 2011 to 2025) and you’re claiming transfer of unused nil rate band from the estate of a spouse or civil partner who died before

You must now:

• complete form IHT217: Claim to transfer unused nil rate band for excepted estates
• attach it to the form IHT205 (2011) that you’ve just completed

If the value in box K exceeds the excepted estate limit, and you’re not claiming a transfer of unused nil rate bad, stop filling in form IHT205(2011) now. You’ll need to complete form IHT400: Inheritance Tax account instead.

Declaration

Read the declaration. If the value in box H is:

• less than, or equal to, the excepted estate limit — tick the first box
• more than the excepted estate limit but less than, or equal to, twice the excepted estate limit and you’re attaching form IHT217 — tick the second box
• less than or equal to £1 million and you’ve deducted spouse or civil partner or charity exemption so the value in box K does not exceed the excepted estate limit — tick the third box

Signing the form

Each person applying for a grant should read the statements above the signatory boxes. In signing the form each person is saying that they have read the statements and will comply with their terms. Each person applying for a grant should enter their name and address in one of the boxes and sign and date the form. HMRC will accept IHT205 forms that are not physically signed from both professional agents and unrepresented taxpayers. We will accept the forms from professional agents if:

• the names and personal details of the legal personal representatives are shown on the declaration page
• the account has been seen by all the legal personal representatives and they all agree to be bound by the declaration

Agent statement

The agent must include the following statement:

As the agent acting on their behalf, I confirm that all the people whose names appear on the declaration page of this Inheritance Tax account have seen the Inheritance Tax account and agreed to be bound by the declaration on page 14 of the IHT400.

Where there is more than one person acting for the estate

We will accept the forms from executors or administrators acting without the help of a professional agent if:

• the names and personal details of any other executors or administrators are shown on the declaration page
• the account has been seen by all the executors or administrators and they all agree to be bound by the declaration

You must include the following statement:

As a legal personal representative acting for the estate, I confirm that all the people whose names appear on the declaration page of this Inheritance Tax account have seen the Inheritance Tax account and agreed to be bound by the declaration on page 8 of the IHT205.

What to do when you’ve finished the form

Keep a copy of the form

You must keep a copy of the signed form (and any continuation papers for Box 13) for your own records. You’ll need them if the value of the estate changes after the grant and tax becomes payable. You may also be asked to provide a copy of the form, or details of the estate, for the Department for Work and Pensions.

HMRC cannot provide a copy of this form.

Keep the papers and records you’ve used

You do not need to send in copies of any papers used to complete form, but you should keep everything safe in case we ask for them.

Where to send the forms

There are slightly different processes to follow depending on whether you’re applying for a grant in England and Wales or Northern Ireland.

England and Wales

If you’re applying for the grant of representation yourself:

• read guidance from Money Helper about using a probate practitioner
• follow the instructions to complete either form PA1P or PA1A depending on your circumstances; see Probate forms and guidance on GOV.UK for more information
• send form IHT205(2011), form IHT217 (if completed) and supporting documents to:

HMCTS Probate
PO Box 12625
Harlow
CM20 9QE

Do not send the forms to HMRC Trusts and Estates (unless claiming a transfer of unused nil rate band after the issue of the grant of representation).

If everything is satisfactory, HMCTS Probate will send you the grant and they’ll send form IHT205(2011) and form IHT217 (if completed) to HMRC.

Northern Ireland

If you’re applying for the grant of representation yourself:

• read probate guidance at nidirect
• follow the instructions to Apply for probate, either online or by post
• send form IHT205(2011), form IHT217 (if completed) and supporting documents to:

NICTS Probate
Royal Courts of Justice
Chichester Street
Belfast BT1 3JF

Do not send the forms to HMRC (unless claiming a transfer of unused nil rate band after the issue of the grant of representation).

If everything is satisfactory, the Northern Ireland Courts and Tribunals Service will send you the grant and send form IHT205(2011) and form IHT217 (if completed) to HMRC.

When you’ll hear from us if we want to see the papers and records

Provided you’ve used form IHT205(2011) correctly, it’s unlikely you’ll hear from us. We have 35 calendar days after the issue of the grant to write to you about the information you’ve given in the form. If we do not write to you in that time, we do not need to see the papers and records and you will not have to pay any Inheritance Tax. This does not apply if there is anything about the estate that you did not tell us on this form.

What happens after you get the grant

You can begin to deal with the estate by collecting in the assets and paying the debts and legacies.

What to do if the value of the estate changes

If, after receiving the grant of representation, you find more assets, or discover the value of an asset has changed you should amend your working copy of the form. For example, the house or some personal goods were sold for a different figure, or a debt you’ve deducted is not going to be repaid.

If, having made these changes, the value at box K is more than the Inheritance Tax nil rate band, you’ll need to tell us about the changes and pay the tax (see below) or claim a transfer of unused nil rate band.

How to tell us about changes

Complete form IHT400: Inheritance Tax account to tell us about the estate if any changes bring the estate over the Inheritance Tax nil rate band. You must send form IHT400 to us within 6 months of finding out about the change to the estate. If you’re late in sending the form to us, you may make yourself liable to financial penalties.

How to work out Inheritance Tax

You can work out the tax payable by deducting the Inheritance Tax nil rate band from the revised value of the estate, then deducting 40% of that amount.

You might need to add some interest to the tax that is due. Interest runs from 6 months after the end of the month in which the death occurred. Our helpline can tell you what the rate of interest is.

If you calculate that there is still no Inheritance Tax due, there’s no need to tell us about the changes. If the changes mean the estate no longer qualifies as an excepted estate, keep a list. This is so you can include them if further changes come to light and there is Inheritance Tax to pay.

Inheritance Tax reference number

If you calculate that there is tax to pay, you’ll need to apply for an Inheritance Tax reference number and payslip so that you can make the payment. You can apply for a reference online at HMRC Inheritance Tax (IHT) Reference. Alternatively, you can use form IHT422: Apply for an Inheritance Tax reference. The form is also available from the Inheritance Tax helpline on: 0300 123 1072.

Ask HMRC to calculate the tax

If you do not want to work out the tax yourself, just send form IHT400 to HMRC and we’ll send you a calculation of the tax and any interest you owe. Send your form to:

Inheritance Tax
HM Revenue and Customs
BX19 1HT

What to do if the exemptions change

The exemptions may change if those who inherit the estate change after the date of death. The beneficiaries of an estate can change who inherits an estate by executing a deed of variation. If the people who inherit the estate change so the net qualifying value of the estate is above the Inheritance Tax nil rate band (meaning there is tax to pay) you should complete form IHT400: Inheritance Tax account. HMRC’s guidance How to value an estate for Inheritance Tax and report its value will help you calculate the value of the estate.

Example

If all the assets passed to the surviving spouse, the entry in box K on form should be 0. If the spouse redirects £100,000 to their children, they must reduce the exemption shown in box J by £100,000 and amend the entry in box K. Because box K still does not exceed the Inheritance Tax nil rate band they do not need to tell us about the change.

If the spouse redirects £400,000 to the children, the new figure in box K exceeds the nil rate band and tax is due. They must complete form IHT400.

When the changes are covered by other exemptions or reliefs

Example

All assets are left to the spouse, but they include a farm that the spouse redirects (by a deed of variation) to the children. The value of the spouse or civil partner exemption must be reduced by the value of the farm and the entry in box K should be amended.

If box K still does not exceed the nil rate band there is no need to tell us about the change. If it does exceed the nil rate band, form IHT400: Inheritance Tax account must be completed. If the farm qualifies for agricultural relief, it may mean there is still no tax to pay, but the relief should be included in Schedule IHT414: Agricultural relief. A copy of the deceased’s will and a copy of the deed of variation should be sent with the forms.

What to do if the value of the estate changes and you need to claim a transfer of unused nil rate band after the grant

If the value of the estate changes to exceed the Inheritance Tax nil rate band and you need to claim a transfer of unused nil rate band, you will need:

• a copy of the IHT205(2011)
• a completed form C4: Corrective Account showing the amendments to the estate
• a completed form IHT217: Claim to transfer unused nil rate band for excepted estates

Send these to:

Inheritance Tax
HM Revenue and Customs
BX19 1HT

Transfer of unused nil rate: documents you should keep

If the deceased whose estate you’re dealing with now left a surviving spouse or civil partner, you should keep full details of this estate in a safe place. This is so a claim may be made for the transfer of any unused nil rate band on the death of the surviving spouse or civil partner.

The information and documents you should keep are:

• a copy of the IHT205(2011) or full written details of the assets in the estate and their values
• a copy of the grant of representation (probate or letters of administration)
• a copy of the will, if there is one
• a note of how the estate passed if there is no will
• a copy of any deed of variation or similar document if one was executed to change the people who inherited the estate

The widow, widower or surviving civil partner may wish to keep these documents with their own will or with other important documents, to ensure a claim can be made for the transfer of unused nil rate band on their death.

Penalties

Most people take care to complete their forms correctly. We want to encourage that and help them get it right. We use penalties to stop people who do not take care from gaining an unfair advantage. If you take reasonable care when filling in form IHT205(2011) we will not charge you a penalty, even if you make a mistake.

When penalties are charged

Only use form IHT205(2011) if the estate is an excepted estate and there is no Inheritance Tax to pay. We may charge financial penalties if you include an inaccuracy in form IHT205(2011) which, when corrected later, means that there is some Inheritance Tax to pay after all.

How to avoid a penalty

If you take reasonable care to get it right, we will not charge a penalty if you make a mistake. We’ll normally accept you’ve taken reasonable care if you’ve followed the guidance in this booklet and have:

• made a thorough search of the deceased’s papers and documents to trace the assets, investments and other financial interests the deceased had when they died
• contacted others, such as family, friends, accountants who may have known about the deceased’s affairs
• included details of all the deceased’s assets, liabilities, other financial transactions and interests that are subject to Inheritance Tax on form IHT205(2011)
• taken reasonable steps to arrive at the open market value of those assets

If you do not take reasonable care, we can penalise any inaccuracies. The penalties will be higher if the inaccuracies are deliberate.

What to do if you discover an inaccuracy

If, after you’ve applied for a grant, you discover an inaccuracy that means Inheritance Tax is payable by the estate, you should inform us as soon possible. This is explained earlier in this guidance, in the section What to do if the value of the estate changes.

You do not need to tell us about inaccuracies that do not mean there is tax to pay. You should make a note of them in case anything else comes to light which means tax is payable when all the inaccuracies are corrected.

How to reduce a penalty

Telling us about an inaccuracy does not mean you’ll automatically be subject to a penalty. Depending on the circumstances, we often view that as taking reasonable care to get your tax right. We can substantially reduce any penalty if you:

• tell us about any inaccuracies before we ask you about them
• help us work out the correct amount of tax
• answer any questions we ask you fully, promptly and honestly

What to do if the inaccuracy arises from information provided by someone else

If another person has provided you with information about the deceased’s affairs, for example, a member of the family has told you about a gift they received, and that person deliberately gave you the wrong information, or kept back some information, we can charge them a penalty. We expect you to have checked that information against the other information you’ve discovered about the deceased and to have questioned any inconsistencies. If you can show you’ve done so, we’ll normally accept that you’ve taken reasonable care and we will not charge you a penalty because of the inaccuracy.

What the penalties are

The penalty is a percentage of the amount of tax that has not been paid. The penalty rate depends on why you made the inaccuracy. The less serious the reason, the smaller the penalty will be. Penalties are:

• deliberate and concealed — maximum penalty 100%, minimum penalty 30%
• deliberate — minimum penalty 20%, maximum penalty 70%
• careless — minimum penalty 0%, maximum penalty 30%

If you have taken reasonable care, no penalty will be charged.

How you’ll know if you have to pay a penalty

We’ll discuss the estate with you to work out the correct amount of tax that is payable and any penalty that may be due, before we send a penalty notice. That way you can understand what has happened and why we’re doing this. If you do not agree, you can appeal against the penalty to an independent tribunal, usually the First-tier Tribunal of the Tax Chamber.

You can also opt for an internal review by an independent HMRC officer, which is a quick and inexpensive way to resolve disputes. For more information see HMRC’s guidance:

• Disagree with a tax decision
• How Inheritance Tax works: thresholds, rules and allowances

When to fill in form IHT217

Complete form IHT217: Claim to transfer unused nil rate band for excepted estates if the following apply:

• the figure in box K on form IHT205(2011) is above the Inheritance Tax nil rate band (£325,000 for tax years 2011 to 2025), but below or equal to twice the nil rate band (£650,000)
• you’re claiming a transfer of unused nil rate band from the estate of a spouse or civil partner who died before

You can access form IHT217 on GOV.UK, or by calling the Inheritance Tax helpline on: 0300 123 1072.

The notes to help you complete the form IHT217 are included in the form itself. The following information may also help you.

Not all estates use this claim form

Do not complete forms IHT205(2011) and IHT217 if the following conditions apply to either the spouse or civil partner who died first, or their estate:

• the estate used up any part of the nil rate band so 100% of the nil rate band is not available to transfer
• they died before 13 November 1974
• they were domiciled outside the UK at the date of death
• the estate was not wholly exempt from Inheritance Tax
• they had jointly owned assets that passed to someone other than the spouse or civil partner who has died now
• they had made gifts to chargeable (non-exempt) beneficiaries in the 7 years before they died
• agricultural or business relief applied to assets in the estate
• they made any gifts with reservation of benefit
• they benefited from a trust during their lifetime

You should complete forms IHT400: Inheritance Tax account and IHT402: Claim to transfer unused nil rate band instead.

Deeds of variation

If a deed of variation, or other similar document, has been executed to change who inherited the estate of the first spouse or civil partner to die, complete IHT217 to show the effect of the will or intestacy and the deed together.

This means that if the whole of the first estate passed to the surviving spouse or civil partner by will and a deed of variation was executed to pass part of the estate to the children, then the part of the estate that passed to the children would not be exempt from Inheritance Tax.

If this is the case, you should stop and complete forms IHT400: Inheritance Tax account and IHT402: Claim to transfer unused nil rate band instead.

Box 10: Gifts

Gifts made in the 7 years before the deceased died would be exempt if they were made to a spouse or civil partner or a charity or other qualifying body. There are also other exemptions such as annual, small gifts and gifts in consideration of marriage and civil partnership which can be deducted. The Gifts section of this guidance gives more information.

Any gifts which are not exempt, such as lifetime gifts to the deceased’s children, would reduce the amount of nil rate band available to transfer and 100% of the nil rate band would not be available. If this is the case, you should stop and complete forms IHT400: Inheritance Tax account and IHT402: Claim to transfer unused nil rate band instead.

Gifts made out of income

Where the spouse or civil partner who died first, died on or after 1 March 2011, the exemption for gifts out of income cannot be deducted from gifts if the value of the gifts total more than £3,000 for each year. If this is the case, you should stop and complete forms IHT400: Inheritance Tax account and IHT402: Claim to transfer unused nil rate band instead.

If the value of gifts made out of income total no more than £3,000 for each tax year, the exemption can be deducted in full. Deaths before 1 March 2011 Where the spouse or civil partner who died first died before 1 March 2011, the value of the exemption for gifts out of income can be deducted in full.

Keep a copy of form IHT217 for your records

HMRC and the probate service cannot provide you with a copy of the form once you’ve sent it in. It’s important to keep a copy together with copy of your form IHT205(2011).

Contact us

See Inheritance Tax: general enquiries if you need any help:

• understanding your Inheritance Tax responsibilities
• confirming the forms you need
• getting paper copies of forms
• completing Inheritance Tax forms

Confidentiality

We have a legal duty to keep your affairs completely confidential and cannot give information to others about an estate, trust or transfer even if they have an interest in it, unless the law permits us to do so. This means we may only discuss a customer’s affairs with that person, or with someone else that the customer has appointed to act for them.

In the case of someone who has died, this means that we can only discuss an estate with the people (or person) who have signed and delivered form IHT205(2011). This means the executors or administrators, or another person appointed to act for them, usually a solicitor or an accountant.

Data Protection Act

HMRC is a Data Controller under the Data Protection Act 2018. We hold information for the purposes specified in our notification to the Information Commissioner. This includes:

• the assessment and collection of tax and duties
• the payment of benefits
• the prevention and detection of crime

We may use the information for any of these purposes.

We may get information about you from others, or we may give information to them. If we do, it will only be as the law permits to:

• check the accuracy of information
• prevent or detect crime
• protect public funds

We may check information we receive about you against information already in our records. This can include information provided by you, as well as by others, such as other government departments or agencies and overseas tax and customs authorities. We will not give information to anyone outside HMRC unless the law permits us to do so.