My family was forward-thinking and took all the steps necessary to decrease my inheritance tax bill prior to my parents’ passing. 

Now we are faced with confusing probate procedures and would like to find out if there’s anything that can be done to reduce our tax burden.

There are several ways to reduce your inheritance tax bill once the probate process has begun

After the probate process is over, there are many ways you can reduce your inheritance tax bill.

MailOnline Property expert Myra Butterworth replies: Although you may not have taken any steps to minimize your inheritance tax bill while your parents still lived, like passing wealth on so it becomes exempt under the seven year rule, there are still many ways that tax bills can be shaved during probate. 

This approach uses accepted discounts provided by HMRC. A tax expert spoke with us and suggested seven methods to lower your tax bills once probate has started.

We take a look at how it is possible to lower the declared value on the assets, especially on property

This article will show you how to decrease the asset’s declared value, especially property.

Nick Green from The CoreProp Group responds:There are many ways to lower or avoid inheritance taxes before the death of a family member. People should do everything they can to make this happen.

Unfortunately, the advice you receive after the death of a loved one will not be as helpful. There are many ways to save money during the often confusing probate process.

The amount of inheritance tax paid depends on the value of the deceased’s estate, which is worked out based on their assets (i.e sum of property, cash, shares, contents etc) minus any debts. This figure then gets taxed at 40% after allowances.

However, you can lower the value of the assets. This is especially true for the property which is usually the most valuable asset in an estate.

At such an emotive time it is easy to overlook HMRC’s small print when assessing an estate’s value.

HMRC advises executors and administrators to hire an independent qualified valuer for the valuation of any property that is being probated.

The professional valuation report – known as an ‘RICS Red Book’ report – should incorporate answers to all the following critical questions, which could help lower the tax bill:

1) When are you going to value your property?

It is crucial to note that probate valuations are based on the date of death. Market movements (such rising energy costs and Covid 19 locksdowns) have an adverse effect on the property markets and can often cause dramatic changes and loss of faith. In April 2020, during Covid’s most unpredictable periods, the market for property was predicted to fall by 20 percent. The value of the property at the date of death may be much lower than the current market value or any estate agent’s appraisal.

2) Does the property have a tenant?

HMRC will usually give a 5 percent discount if the property is occupied for a typical term of Assured Shorthold Tenants. This typically applies to properties whose terms are less than one year.

The deductions may be higher if the tenant has a long-term fixed-term tenancy or is on a commercial lease. This concession is often overlooked by estates.

(3) Any safety certificates missing or with major defects?

These matters must be taken into consideration when valuing the property if it was in poor condition at the time of the death.

Properties in flat blocks may not be required to have EWS1 forms (External Wall Safety), which indicates that their cladding is fire-safe.

All of these issues could make it difficult to get a loan on your property.

Basics of inheritance tax 

The inheritance tax charged is 40% above the exemptions that everyone receives on their estate, also known as the nil rate band.

This is made up of the standard nil rate band of £325,000 per individual – of which any unused element can be passed on to a spouse or civil partner, effectively doubling their allowance to £650,000. 

Under current rules, if you give away a main family home to direct descendants, a total of £500,000 each, or £1million combined, is the maximum value that a married couple or civil partners’ estate can reach before it starts being liable for the 40 per cent inheritance tax rate.

In total, this means property-owning spouses can benefit from a £1million buffer before their estate incurs inheritance tax.

But if the total value of an estate is worth £2million or more, the additional main residence nil rate band will be tapered at £1 for every £2 over the £2million threshold, meaning some higher value estates eventually lose the own home benefit altogether.

It is important to also remember the seven-year rule when it comes to inheritance taxes. 

This applies to gifts that are above set limits – for example, making more than £3,000 in gifts per year – and are known as potentially exempt transfers. 

This gift can only be exempted from inheritance taxes if it is given more than seven years.

When someone passes away between the years of three and seven after making a gift to another person, their inheritance tax will be reduced on a sliding scale. 


4) Did the property have co-ownership at the time the death occurred?

Section 18 of the IHT Manual permits a further 15 per cent deduction of the deceased’s share of the property, if at the valuation date, any co-owner remained in occupation of the property as their main residence.

Even if the owner(s) of the property was not their primary residence, they can get a discount up to 10%

5) Does the company own the property?

Again, a discount on the deceased’s share should be applied, up to a level of 20 per cent depending on whether the deceased owned minority shares or majority shares.

6) Is there any problem with neighbours?

For example, a neighbour’s planning application can have an adverse effect on the value of a property.

There may also be macro changes, like schools closing or streets being changed. This could affect the value of your property.

7) Are the flats in which the property is located?

Often, the managing agent and the freeholder are in the process or preparing for major repairs to block common areas. An additional large invoice is sent to leaseholders.

These additional expenses can often be overlooked when the property is valued for probate.

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