Can I Claim Overpaid Inheritance Tax After The House Price Fell?

3 minutes reading time

When someone dies, Inheritance Tax is paid on the probate value of an estate, i.e. the open market value at the date of death.  If property is subsequently sold at a lower price, relief from Inheritance Tax may be available.

Falling house prices

According to the Land Registry, while the average price of a property in the UK went up by 0.9%, London house prices have dropped by 2.7% over the year to June 2019.  The more expensive the property, the more likely you are to save.

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Difference %

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Inheritance Tax on property

Inheritance tax should typically be calculated and paid within a year of someone’s death. However, selling the assets, like property, can take much longer, and the price realised may be less than the value originally quoted to HMRC – especially in a falling market. This can lead beneficiaries feeling hard done by.

If a property is sold at a loss against probate value within four years of the deceased’s death, you may be able to reclaim the overpaid Inheritance Tax.  In this current property market, thousands of people could take advantage of the tax break and claim the refund.

The IHT trigger point

To qualify for a refund, the actual sale price must be 1% or £5,000 less (whichever is lower) than the property value on which Inheritance Tax was calculated.

Who can claim?

Relief can be claimed only by the persons originally liable for the tax attributable to the value (the ‘appropriate’ persons) and this may be the personal representatives, the trustees of settled estate or donees of lifetime gifts.  A claim will not be possible if 100% business relief or agricultural property relief applied to the value on death as no tax was attributable.

Next steps

For more information on how we can assist, contact our Wills, Trusts and Probate team on 0161 941 4000 or email