Increase in the number of IHT reclaims on falling share prices
The number of families reclaiming inheritance tax due to falling share prices has more than doubled in the past two years.
More than 1,850 families reclaimed overpaid inheritance tax (IHT) because of falling share values in the 2019/20 tax year, an increase of almost 1,000 from the 858 who did so in 2017/18.
The figures come from a Freedom of Information request submitted by NFU Mutual.
IHT is assessed on the value of a person’s estate on the date of death and the tax must normally be paid within six months.
If, when the executors come to sell any quoted shares or other qualifying investments the price has fallen, they can reclaim the overpaid tax by submitting an IHT35 form to HMRC.
Families can reclaim overpaid IHT on the value of qualifying shares and investments sold in the 12 months after death.
NFU Mutual says that following the stock market crash in February and March, many executors will be able to make a claim.
Sean McCann, chartered financial planner at NFU Mutual, says: “These figures show more people are becoming aware that they can reclaim overpaid inheritance tax. Following the recent falls in the stock market it’s likely that many more bereaved families will be able to benefit.
“Inheritance tax can also be reclaimed when houses are sold at a lower value within four years of death. With coronavirus potentially impacting house prices, it’s important that families are aware of this ability to reclaim which could save them thousands of pounds.’’
Tips for reclaiming IHT
You can submit an IHT35 form to HMRC online, but there are a number of traps to look out for.
Firstly, the sale of the shares must be made by the ‘appropriate person’ – normally the executor.
If the shares have been passed to members of the family who then sell at a loss they cannot reclaim.
All the shares sold by the executor are aggregated, so if some have gone up in value this will reduce the amount of IHT that can be reclaimed.
One way around this is to pass the investments that have gone up in value to the beneficiaries and only sell the ones that have fallen in value, maximising the amount the amount that can be reclaimed.