23 March 2020
Claiming An Inheritance Tax Refund After Market Falls
Anyone who has recently inherited shares or property may be entitled to a tax refund. The dip in the stock market and property prices caused by the coronavirus, mean that tax could have been overpaid. As a result, beneficiaries should be looking into claiming an inheritance tax refund after the recent market falls.
Overpayment Of Inheritance Tax
Inheritance tax must be paid on someone’s estate within 6 months of their death. The tax is calculated on the value of assets on the date of death. This might have been much higher than the value now, after the market crash.
Over the past few weeks, as a result of the coronavirus pandemic, the value of most listed shares has dropped significantly. The property market has also fallen. If inherited shares or property have been or will be sold after the price drop, then the price realised could be much lower than it was when the shares were inherited, before the crash.
As a result, anyone selling shares or property could be deemed to have ‘overpaid’ on the original tax bill.
Claiming A Tax Refund
Claiming an inheritance tax refund is possible if you have sold assets you inherit at a loss. The sale should be within 12 months of the date of death for shares, or within 4 years for property. There rebates are quite common: more than 4,500 people received one in the 2018-19 tax year.
To see how it works, take the example of a share portfolio valued at £1 million at the date of death. The inheritance tax owed would be £270,000. But if the shares halved in value to £500,000 during the market crash, and are sold within a year of the date of death a rebate of £200,000 can be applied for. This would lower the tax paid to just £70,000.
The Inland Revenue will not notify someone that they are entitled to a rebate. It must be applied for.
To discuss your situation and whether you are entitled to a tax refund, please contact us.
Notes
For more information on administering an estate and probate, click here.