Have you overpaid on Inheritance Tax following falls in the market?

  • 17th April 2020

If you are planning on selling the shares you inherited, you may be entitled to a rebate.

If you inherited shares before the recent market falls, you will have incurred a tax bill reflecting prices before the crash. Not many will be aware however that you may be entitled to a refund on the previously paid inheritance tax (IHT).

IHT is paid on the value of assets on the date of the deceased passing with tax then to be paid in the following 6 months. This means that the IHT tax bill would have reflected historically high prices for shares. If that estate was greater than £325,000, the tax rate would have been 40%.

As we are all fully aware however, share values have plummeted as the shock of the global pandemic hit the financial markets. Therefore if you are planning on selling the shares you inherited, you may be entitled to a rebate. This is because you will have been deemed as having ‘overpaid’ on the original IHT bill.

You may be able to apply for a rebate if you incur a loss during the sale of shares within 12 months of inheriting them.

In a recent article in the Money Observer the quoted the following example:

“If a portfolio with a value of £1m at the date of death was inherited, the tax owed would be £270,000. Whereas if the portfolio of shares halved in value to £500,000 during the market crash the on sale within 12 months of the date of death, a rebate can be applied for lowering the IHT to just £70,000.”

So if you have inherited shares in the last 12 months and planning to sell them, please do take advice from a financial adviser to ensure you can reclaim any overpaid IHT due to you.

Information contained within this article is not a personal recommendation of Forrester Boyd Wealth Management. The wording in this article is not to be construed as an offer or advice.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.

All data and figures referred to in our news section are correct at the date of publishing and should not be relied upon as still current.