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90% of non-taxpaying estates will have reduced reporting requirements from 1 January 2022

The government announced earlier this year that changes would be made from 1 January 2022 to simplify the compliance and reporting requirements on death. The legislation to give effect to these changes has just been released and we are now able to see the detail.

What do the changes affect?

The changes affect the type of Inheritance Tax ("IHT") account that has to be completed when someone dies.

There are two main types of IHT account that can be filed:

  • a shorter "IHT205" account which can be submitted directly to the Probate Registry when applying for the grant of representation, provided certain conditions are met; or
  • a longer "IHT400" account which requires significantly more detail and has to be submitted to, and acknowledged by, HMRC prior to applying for the grant of representation.

Even where there is no tax to pay, it can often be necessary to file an IHT400 account.

What is changing?

Qualifying "excepted estates" (generally more straightforward non-taxpaying estates which aren't required to submit an IHT400) will no longer have to complete an IHT205 form. Instead, much more limited and simplified information will need to be provided in order to obtain the grant of representation.

The government is also extending several of the conditions which enable an estate to qualify as "excepted". The most significant change is for an exempt estate (i.e. where the spouse or charity exemption applies) where the gross estate limit will increase from £1m to £3m - such estates will qualify for the reduced reporting.

This will come as welcome news to many married couples and civil partners who fall in the £1m - £3m bracket. Prior to these changes, a surviving spouse/civil partner would have to go through the arduous (and typically more costly) process of completing an IHT400 account, even though there was no IHT at stake.

When do the changes come into force?

The amendments will take effect for deaths on or after 1 January 2022.

From 1 January 2022, over 90% of non-taxpaying estates each year will not have to send IHT forms to HMRC when a grant of representation is required


private client, personal tax