Families handling the estate of a loved one could be due a significant inheritance tax (IHT) refund — thanks to a little-known rule and the recent stock market slump.
As global markets react to trade tensions and economic uncertainty, private wealth lawyers are reminding executors that losses on shares could reduce tax bills — but only if they act within a strict time frame.
Inheritance Tax is normally calculated based on the market value of assets, including quoted shares, at the date of death.
If those shares are later sold at a lower price, the estate may be eligible to substitute the sale value and reclaim tax on the difference.
Judith Millar, partner in the Private Wealth team at law firm Broadfield said: "This relief effectively allows the executors of an estate to substitute the actual sale price for the higher date of death valuation."
To qualify, all sales of qualifying shares within 12 months of death must be aggregated and show an overall loss.
Millar said the current market conditions have made this relief especially relevant
GETTYClaims must be submitted within four years from the end of that 12-month period using HMRC’s IHT35 form. Supporting documents must include the value of the shares at death and the actual sale prices.
Millar said the current market conditions have made this relief especially relevant.
She said: "It is a potentially valuable relief when stock markets fall, resulting in the option to claim a refund of IHT already paid."
Stock markets have experienced sharp fluctuations in recent weeks due to global economic uncertainty and trade policy announcements.
The relief applies only to quoted shares and certain securities. It does not apply to unit trusts, private company shares or assets that are repurchased by the estate within two months of sale.
The stock market has been volatile since Trump returned to office ReutersThe standard rate of Inheritance Tax is 40 per cent, meaning a substantial fall in asset value can lead to a significant refund.
For example, a £20,000 drop in share value could result in an £8,000 reduction in tax owed.
Executors are advised to review all share transactions within 12 months of death and seek advice where appropriate.
Claims can be made up to four years after the end of the 12-month period
GETTYMillar said claims can be made even if the administration of the estate has already been completed.
Miller noted: "Claims can be made up to four years after the end of the 12-month period."
The government provides the necessary forms and guidance on its website, but legal professionals recommend careful documentation and expert input before making a claim.
