As part of applying for a Grant of Probate, you will need to complete an inheritance tax form (IHT). You will need complete an IHT irrespective of whether there is tax to pay, unless the estate is exempt from Probate.
There are a number of Inheritance Tax Forms (IHT forms) but the ones that most people have to think about are IHT205 and IHT400.
The choice of form depends on the Gross Value of the Estate.
The Gross Value of the Estate is the value of everything in the estate (including property, vehicles, jewellery, money in the bank, savings, assets abroad, all utility and service provider accounts, shares and investments etc.) minus the liabilities (debts, mortgages, loans, credit cards etc).
IHT205 or IHT400? Which form do I need?
As a general rule, you use IHT 205 if the Gross Value of the Estate is:
- Under £325,000; or
- Under £650,000 because you can apply the property allowance: The Residence Nil Rate Band (this is outlined below) from your spouse/civil partner who passed away previously; or
- Under £1,000,000 with most of the assets going to a surviving spouse or civil partner.
You’ll need to use IHT400 if the Gross Value of the Estate is worth more than £325,000, without any allowances for the value of the property and no surviving spouse or civil partner to inherit the estate.
You must include any gifts of money made in the last 7 years of the life of the person who died and any trusts that the deceased person benefited from.
These allowances are correct as of November 2021, but they may change over time.
How much is Inheritance Tax?
There are two rates for IHT:
- 40% on everything liable for tax; or
- 36% if at least 10% of the estate has been left to charity
What about Residence Nil Rate Band?
When the Gross Value of the estate is more than £325,000, you may be able to apply for Residence Nil Rate Band allowance. This gives each spouse an allowance of £175,000 against the value of any property, as long as it is being passed down to children or grandchildren.
You apply the Residence Nil Rate Band to the tax calculation after you have completed IHT400. This is done before you send your IHT400 form into HMRC. There is a link in Further Reading with more information on this topic.
Do I need an IHT Reference Number?
You only need an IHT reference number if there is inheritance tax to pay (i.e. when you have used IHT400). You need to get this number at least 3 weeks before you submit the form and make an IHT payment. There’s a link to apply for the reference number in Further Reading.
Where do I get the forms?
The forms are available from GOV.UK (links in Further Reading below). You can fill these out online or use paper forms instead.
Where do I send my IHT Form?
You send the form to HMRC’s Nottingham office. The address is:
HMRC Trusts and Estates
PO Box 38
Castle Meadow Road
How much time do I have before sending in the IHT form?
You have a year from when the person died to send in the IHT forms.
At Settld, we can help you calculate the Gross Value of accounts. Our service is free for small estates that do not require probate. Settld is designed to make it easy for you to notify companies when a loved one has died, and request closure, transfer or amendment of their accounts. All you have to do is fill in a simple online form.
For estates going through probate use Settld’s award winning service for simplifying the process and admin before you apply for probate.
If you are executor for an excepted estate and you want help in filing a probate application, find out how Settld can help here
If you’d like to know more about Settld and how we can help, visit our website www.settld.care or you can email firstname.lastname@example.org or call us on 0344 327 3996 (10am-6pm, Monday to Friday)
GOV.UK – how inheritance tax works
GOV.UK – IHT Reference Form Number
GOV.UK – link for IHT forms
GOV.UK – working out Residence Nil Rate Band