Families urged to claim little-known tax relief on inheritance bills

Telegraph

16-04-2025

Families who have recently paid inheritance tax on a late relative's investments are being urged to check if they qualify for a little-known relief measure.
Last week's dip in global stock markets means some families could be in line for a rebate, experts have said.
The amount of inheritance tax paid on assets – including shares – is decided by their value at the date of the original estate holder's death.
But if those assets are sold at a lower price within 12 months by the estate's beneficiary, they can reclaim the difference in tax from HMRC. It is known as 'loss on sale relief', which can be worth thousands of pounds.
Stock markets around the world have stuttered following US president Donald Trump's global tariff war. The S&P 500 index, which tracks large American companies and is incredibly popular with investors, has slipped 8pc since the beginning of 2025, while the Euronext 100 index has fallen more than 4pc during the last 12 months.
Shaun Moore, tax and financial planning expert at advice firm Quilter, said: 'The standard rate of inheritance tax is 40pc, 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. [They] should monitor the market value of shares and consider the timing of sales to maximise potential relief.'
Loss on sale relief only applies to qualifying investments, which include listed shares and securities, including those listed on foreign stock exchanges, along with holdings in authorised unit trusts. Stocks on the Alternative Investment Market (Aim) are not eligible for the relief.
But anybody considering selling shares in order to take advantage of loss on sale relief should take into account the stock market's volatility and the possibility that their value may increase again, warned Quentin Holt of tax advice firm Blick Rothenberg.
Mr Holt said: 'A decision would need to be made on whether to sell qualifying investments against the background of the current volatility in the stock market, given the rebound in stock prices in recent days, and how far through the 12-month period after death the estate is.
'Care should be taken before committing to any sales and an individual's wider investment strategy should always be considered.'
In order to be eligible for loss on sale relief, all shares in the estate sold within 12 months of date must incur a net loss, Mr Holt added.
'It is not possible to pick and choose so if some shares in the estate are sold at a profit, this will reduce the figure on which relief can be claimed. It is possible to make a provisional claim before the 12-month period has elapsed.'
Anybody hoping to take advantage of loss on sale relief must make their claim to HMRC within four years of the end of the 12-month period following the date of the estate holder's death.
Mr Moore added: '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.
'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.'