New Year Inheritance Tax reporting - reduction but not simplification

  • Person icon Pat Nown
  • Calendar icon 19 January 2022 13:29

Inheritance Tax forms need to be completed even when no Inheritance Tax is due. This generally comes as a surprise to many.

Spring Budget 2021 confirmed that changes would be made. This followed recommendations by the Office of Tax Simplification. The reason for these changes in reducing this administrative burden is practical common sense.

Man writing on a piece of paper

The aim is that over 90% of  non-taxpaying estates each year will not have to send Inheritance Tax forms to HMRC. This applies for deaths which occur on or after 1 January 2022.

Whilst this is welcome, the decision-making process required to correctly conclude whether one of the criteria for reduced form filling is met, has never been an easy one.

Despite the changes, it remains complex. All those involved must take care, whether as a professional practitioner or ‘civilian’ (personal application by a family member).

The personal representative of an estate where no Inheritance Tax is due is excused from delivering full Inheritance Tax accounts where the estate qualifies as an ‘excepted estate’.

The identification of an excepted estate and reporting requirements for an excepted estate were established by the Inheritance Tax (Delivery of Accounts) (Excepted Estates) Regulations 2004 (SI 2004/2543) and subsequent amendments.

These are now further amended by the Inheritance Tax (Delivery of Accounts) (Excepted Estates) (Amendment) Regulations 2021 for deaths on or after 1 January 2022.


What is an excepted estate in Inheritance Tax?

An estate where no Inheritance Tax needs to be paid MAY qualify as an excepted estate. Where an estate is excepted then this reduces the reporting requirements for Inheritance Tax.

  • There are three categories of excepted estate as follows:
  • a low value estate (UK domiciles only)
  • an exempt estate (UK domiciles only)
  • an estate of a non-UK domicile.

Each category has specific qualifying conditions. The conditions for low value and exempt estates have seen various relaxing amendments. This means that it is more likely that a non-tax paying estate will qualify.

For non-UK domiciles, it could be said that further conditions are imposed.

The detailed changes are not covered here but will be included in our upcoming events.


Upcoming events, courses and certificates covering Inheritance Tax

Changes to Inheritance Tax reporting

Where estates do qualify as excepted then reduced reporting requirements apply.

For deaths up to 31 December 2021, there is a need to complete IHT form 205 for a UK domicile (and IHT  form 217 where relevant), or a form 207 for a non-UK domicile rather than the full IHT 400 account return process.

For  a UK domicile excepted estate death from 1 January 2022 there is no longer a need to complete forms IHT205/217.

Instead, the reduced information required is now in the relevant probate application PA1A/PA1P.

Non-UK domiciles will still need to complete form 207 where eligible.

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