In this section:
  • What qualifies as an excepted estate for Inheritance Tax

What qualifies as an 'excepted estate' for Inheritance Tax?

Whether or not an estate is an excepted estate determines which Inheritance Tax forms you fill in as part of the probate process. Most estates are excepted estates and this means they don't have Inheritance Tax to pay. However there are other conditions that the estate must meet to qualify.

On this page:

When an estate is an excepted estate

Usually, if an estate has no Inheritance Tax to pay, it will be an excepted estate. However, this is not always the case. Some estates that don't owe Inheritance Tax aren't excepted estates, and you must fill in a full Inheritance Tax account (form IHT400).

For deaths after 1 September 2006, the estate will generally be an excepted estate if one of the following applies:

  • it's a low value estate - valued at under the Inheritance Tax threshold (£325,000 in 2014 to 15 tax year) but see more about thresholds in the section below
  • it's an exempt estate - the deceased person left everything (or everything over and above the Inheritance Tax threshold) to a spouse or civil partner living in the UK or to a 'qualifying' charity (and the estate is valued at under £1 million)
  • the deceased person was a 'foreign domiciliary' - they lived permanently abroad and died abroad and the value of their UK assets is under £150,000

For deaths on or after 6 April 2010 an estate will also be an excepted estate if both of the following apply:

  • the value of the estate is less than twice the Inheritance Tax threshold (£650,000 in 2014 to 15 tax year)
  • 100% of the unused Inheritance Tax threshold from a late spouse or civil partner can be transferred to the deceased - find out more by following the first link below

This means you'll probably need to fill in form IHT205 Return of Estate Information (or form C5 in Scotland) as part of the probate process. You'll also need to fill in form IHT217 if you're transferring an unused Inheritance Tax threshold from a late spouse or civil partner to the deceased.

However, you must first be sure that the estate doesn't meet any of the conditions that disqualify it from being excepted (see the section below about when an estate is not an excepted estate).

Transferring an unused Inheritance Tax threshold

Find out more about Inheritance Tax if the deceased was 'domiciled' abroad

Tax efficient giving to charity - the basics

Find Inheritance Tax forms

Top

When an estate is not an excepted estate

An estate won't be an excepted estate if any of the following is true about the deceased:

  • they left an estate worth more than the Inheritance Tax threshold (£325,000 in 2014 to 15 tax year) or an estate worth more than £1 million to a spouse, civil partner or 'qualifying' charity
  • they left an estate worth more than twice the Inheritance Tax threshold (£650,000 in 2014 to 15) when 100% of the unused Inheritance Tax threshold could be transferred from a late spouse or civil partner
  • the deceased's estate needs a transfer of unused Inheritance Tax threshold from a late spouse or civil partner to avoid paying Inheritance Tax and less than 100% is available to transfer - even if the full 100% isn't needed
  • they had a permanent home outside the UK when they died but had a permanent home within the UK at one time
  • they had assets in a trust valued at more than £150,000 or held more than one trust
  • they had assets worth more than £100,000 outside the UK
  • they made gifts within seven years before they died and the value of the gifts was more than £150,000 after deducting any Inheritance Tax exemptions
  • they made gifts into trusts
  • they continued to benefit from a gift they had made to someone else, such as their house or car (known as a 'gift with reservation of benefit' - more on this in the link below)
  • they had a life insurance policy that paid out to someone else - but not to their spouse or civil partner - and they had also bought an annuity (see more about insurance policies in the link below)
  • they had a personal pension from which they had not taken their full retirement benefits, and when they were terminally ill or in poor health they changed the death benefits payable on it to increase the value of the lump sum
  • they had - or were the beneficiary of - an 'Alternatively Secured Pension' or unsecured pension
  • they elected that property that they had given away should be part of their estate for Inheritance Tax, rather than pay a 'pre-owned asset' charge
  • they were regarded as 'deemed domicile' in the UK - this usually applies if the deceased wasn't born in the UK but had lived here for the last 17 years, or was born in the UK but died within three years of emigrating

In any of these cases, the estate is not an excepted estate and you must fill in a full Inheritance Tax account (form IHT400).

Find out about gifts that are exempt from Inheritance Tax

See more about 'gifts with reservation' in our guide to passing your home to your children

Insurance policies - answers to common questions on the Inheritance Tax forms

Pensions - answers to common questions on the Inheritance Tax forms

Top

Which Inheritance Tax threshold to use

When you're deciding if the estate is a 'low value estate' you usually use the Inheritance Tax threshold that applied at the date of death. However, if the death was after 5 April and before 6 August in the same year, and you're applying for the grant of probate (or 'confirmation' in Scotland) before 6 August in the same year, then you must use the threshold from the previous year.

Check Inheritance Tax thresholds over the years

If the death was before 1 September 2006

Since 1 April 1981, the rules for deciding which estates are excepted estates have changed a number of times. To find out the rules that applied for deaths before 1 September 2006, follow the links below.

Deaths between 6 April 2004 and 31 August 2006

Deaths between 6 April 2002 and 5 April 2004

Deaths between 6 April 1996 and 5 April 2002

Deaths between 1 April 1981 and 5 April 1996

For deaths before 1 April 1981, there weren't any excepted estates, so a full Inheritance Tax account is needed in all cases.

Top

More useful links

Find the right Inheritance Tax and probate forms

Help with the Inheritance Tax return of the estate information forms

Download the IHT206a - guidance on exempt beneficiaries or 'donees', such as charities and national institutions (PDF 105K)

Top