HMRC Inheritance Tax: customer guide

Is it an excepted estate?

The following rules are for deaths on or after 1 September 2006.
For deaths before that date see our summary of excepted estates rules.

An excepted estate is an estate where no Inheritance Tax (IHT) is due and a full Inheritance Tax account is not required. From 6 April 2004 there are three types of excepted estate:

Low value estates

These are estates where there can be no liability to IHT because the gross value of the estate does not exceed the IHT threshold. The conditions for these estates are that:

Exempt estates

These are estates where there can be no liability to IHT because the gross value of the estate does not exceed £1,000,000 and there is no tax to pay because one or both of the following exemptions apply:

No other exemption or relief can be taken into account. Spouse or civil partner exemption can only be deducted if both spouses or civil partners have always been domiciled in the United Kingdom (UK). And charity exemption can only be deducted if the gift is an absolute gift to the organisation concerned.

The conditions for these estates are that:

  • the deceased died domiciled in the UK
  • the gross value of the estate, does not exceed £1,000,000
  • the net chargeable value of the estate after deduction of liabilities and spouse or civil partner exemption and/or charity exemption only does not exceed the IHT threshold
  • if the estate includes any assets in trust, they are held in a single trust and the gross value does not exceed £150,000 (unless the settled property passes to a spouse or civil partner or to a charity when the limit is waived)
  • if the estate includes foreign assets, their gross value does not exceed £100,000,
  • if there are any specified transfers, their chargeable value does not exceed £150,000
  • the deceased had not made a gift with reservation of benefit
  • the deceased did not have an alternatively secured pension fund, either as the original scheme member or as the dependant or relevant dependant of the original scheme member

In Scotland, the spouse or civil partner exemption and/or charity exemption must be calculated on the basis that any entitlement to legitim against the estate will be claimed in full. In other words, only the minimum amount of spouse or civil partner exemption and/or charity exemption available after accounting for legitim can be deducted to establish whether the IHT threshold is exceeded.

Foreign domiciliaries

These are the estates where there can be no liability to IHT because the gross value of the estate in the UK does not exceed £150,000. The conditions for these estates are that:

  • the deceased died domiciled outside the UK
  • the deceased was never domiciled in the UK or treated as domiciled in the UK for IHT purposes
  • the deceased’s UK estate consisted only of cash or quoted shares and securities passing under a Will or intestacy or by survivorship
  • the gross value of the estate did not exceed £150,000
  • the deceased did not have an alternatively secured pension fund, either as the original scheme member or as the dependant or relevant dependant of the original scheme member

If you are dealing with an estate where the death was on or after 1 September 2006, you can find out if the estate you are dealing with qualifies as an excepted estate, please visit the page entitled: Does this estate qualify as an excepted estate?