Estates exempt from Inheritance Tax

When applying for probate, one of the first things executors need to establish is which Inheritance Tax reporting requirements apply to the estate.

It is important to understand that not every estate requires a separate Inheritance Tax account. Depending on the value and circumstances of the estate, it may qualify as an ‘excepted estate’, meaning that a full Inheritance Tax account (Form IHT400) is not required.

To assist with the probate or confirmation application and the appropriate reporting to HMRC, the personal representatives must establish whether the estate qualifies as an excepted estate or whether a full Inheritance Tax account needs to be submitted.

This will determine which forms and declarations need to be completed when applying for a grant of probate in England and Wales or confirmation in Scotland.

What is an excepted estate?

An excepted estate is an estate that meets certain conditions set by HMRC and does not normally require a full Inheritance Tax account.

For deaths on or after 1 January 2022, HMRC recognises different categories of excepted estate, including low-value estates and exempt estates.

The rules depend on the value of the estate, the deceased’s lifetime gifts, any assets held in trust, overseas assets and other circumstances.

It is important to consider more than just the assets owned by the deceased when they died. Certain lifetime gifts, jointly owned assets and trust interests may also need to be taken into account when deciding whether an estate qualifies.

Low-value excepted estates

An estate may qualify as a low-value excepted estate where:

• The deceased was a long-term UK resident immediately before death, for deaths on or after 6 April 2025. Different domicile rules apply to earlier deaths.
• The gross value of the estate, including the deceased’s share of jointly owned assets and relevant lifetime transfers, does not exceed the available Inheritance Tax nil-rate band.
• If the estate includes assets held in trust, they are held in a single trust and their gross value does not exceed £250,000.
• If the estate includes foreign assets, their total gross value does not exceed £100,000.
• The chargeable value of any specified transfers does not exceed £250,000.
• The deceased had not made a gift with reservation of benefit.

Other detailed conditions also apply.

Exempt and excepted estates

An estate may qualify as an exempt and excepted estate where:

• The deceased meets the relevant UK residence or domicile conditions, depending on the date of death.
• The gross value of the estate, including relevant jointly owned assets and specified lifetime transfers, does not exceed £3 million for deaths on or after 1 January 2022.
• After deducting allowable liabilities and permitted spouse or civil partner and/or charity exemptions, the net chargeable value does not exceed the available Inheritance Tax nil-rate band.
• Any assets held in trust meet the applicable trust conditions. Generally, there must be only one relevant trust, with a gross value not exceeding £1 million and a net chargeable value, after permitted exemptions, not exceeding £250,000.
• Foreign assets do not exceed £100,000 in gross value.
• The chargeable value of specified transfers does not exceed £250,000.
• The deceased had not made a gift with reservation of benefit.

Only certain exemptions can be taken into account when establishing whether an estate qualifies. In particular, spouse or civil partner and charity exemptions must meet HMRC’s specific requirements.

For deaths on or after 6 April 2025, the long-term UK residence rules are particularly important. The availability of spouse or civil partner exemption for these purposes depends on the residence status of both individuals.

What are specified transfers?

Specified transfers are certain gifts made by the deceased during their lifetime which can be included when determining whether an estate qualifies as an excepted estate.

They can include transfers involving:

• Cash.
• Quoted stocks and shares.
• Household and personal goods.
• Land and buildings.

There are specific conditions governing which gifts qualify.

For example, gifts of land and buildings generally need to be outright gifts between individuals to qualify. Gifts to trusts or companies, or gifts where the deceased retained a benefit in the property, may not qualify.

For deaths on or after 1 January 2022, the chargeable value of specified transfers must not exceed £250,000.

If the deceased made significant gifts during their lifetime, it is important to establish whether these qualify as specified transfers or whether they mean that a full Inheritance Tax account is required.

When is a full Inheritance Tax account required?

If the estate does not meet the conditions for an excepted estate, the personal representatives will generally need to complete Form IHT400 and provide HMRC with full details of the estate.

This includes information about:

• The deceased’s assets and liabilities.
• Lifetime gifts and other transfers of value.
• Jointly owned assets.
• Property and investments.
• Assets held in trust.
• Overseas assets.
• Applicable exemptions and reliefs.

An estate may require a full Inheritance Tax account even where the amount of Inheritance Tax ultimately payable is nil.

For example, the estate may not qualify as an excepted estate because of the nature of the deceased’s lifetime gifts, trust arrangements or other circumstances.

What happens next?

Once the personal representatives have established whether the estate qualifies as an excepted estate, they can determine which probate or confirmation application forms and Inheritance Tax reporting requirements apply.

In England and Wales, qualifying excepted estates can generally be dealt with through the relevant declarations in the probate application without submitting a separate Form IHT400.

Where a full Inheritance Tax account is required, Form IHT400 must normally be submitted to HMRC before the probate application can proceed.

In Scotland, separate confirmation procedures and Inheritance Tax forms apply, including the relevant C1 and C5 forms where appropriate.

If you are unsure whether an estate qualifies as an excepted estate, or whether particular lifetime gifts or trust arrangements need to be reported, you should seek advice from HMRC or a suitably qualified probate or tax professional.

Expert guidance on applying for probate

Working out whether an estate qualifies as an excepted estate can be complicated, particularly where the deceased made substantial gifts during their lifetime, owned assets jointly or had interests in trusts or overseas property.

Lawpack’s DIY Probate Kit provides guidance and practical assistance to help you understand the probate application process and the paperwork involved.

It is important to check that you are using the correct forms and guidance for the date of death and the relevant jurisdiction.

Other useful information

• Completing Form IHT400 when Inheritance Tax is due
• What is probate?
• Do I need a grant of probate?
• Is Inheritance Tax due on the estate?

• Category: Probate articles