Brits urged to claim ‘little known’ inheritance tax relief that could | Personal Finance | Finance
Stock market falls may mean some families are able to claim a refund on any inheritance tax (IHT) they have paid on shares they inherited from a loved one who has died, experts say.
Quilter, a wealth and financial adviser, said families who had paid IHT after a relative who owned shares had passed away may be able to apply for ‘loss on sale relief’. Quilter said a fall in global stock markets earlier this month following US President Donald Trump‘s decision to impose tariffs on countries around the world meant that the value of shares owned by deceased family members may have fallen.
The amount of inheritance tax paid on shares is calculated using their value when their owner dies.
But if the assets are sold for a lower price within 12 months of the owner dying then families can reclaim the difference.
Shaun Moore, tax and financial planning expert at advice firm Quilter explained that IHT is paid at 40%. So if someone sold shares that had been worth £10,000 but were now only worth £6,000, they would pay £2,400 instead £4,000 in tax and be able to reclaim the difference.
Loss on sale relief can be claimed on shares, including those held in collective investments such as unit trusts.
Moore said claims must be submitted using the official HMRC form (IHT35) and supported by documentation that includes the value of the shares at death and the actual sale prices. Claims can be made up to four years after the end of the 12-month period following the date of death.”
He explained that the standard rate of IHT is 40%, so a significant drop in share value can lead to substantial refunds. For example, a £20,000 drop in share value could result in an £8,000 reduction in tax owed. “Given the recent volatility in the stock market, this relief is particularly relevant and could be music to many executors’ ears.
“Executors of estates where the deceased held significant investments in publicly traded shares, and estates that have experienced a decline in the value of these shares within 12 months of the date of death, can benefit massively from this relief. Executors should monitor the market value of shares and consider the timing of sales to maximise potential relief.
“For anyone hoping to use the relief accurate record-keeping is essential. Executors must maintain detailed records of share values at death and sale prices. Ensure all claims are supported by the necessary documentation and submitted within the specified time frame.”
“If you claim loss on sale relief for Inheritance Tax, you can’t also use the same loss to reduce your Capital Gains Tax (CGT). When you use this relief, the lower sale price of the shares becomes the new base value for CGT. This means you can’t use the original higher value to calculate losses.”
