Inheritance tax: Deadline risks families missing out on unlocking extra money

Ministers are facing continued pressure on inheritance tax, as administrative delays have made it harder for people to claim for loss relief on share prices.

There are calls to extend the current 12-months claims window for loss relief on share price falls for inheritance tax (IHT).

Loss relief can only be claimed on shares if they are sold within one year from the death date, but can only be sold once probate - the authority to share out the estate of the person who has died - has been granted.

The inheritance tax on the person’s estate is worked out on its value and the date of death.

Mike Birdy

In a letter to Parliament, the Association of Taxation Technicians (ATT) said: “Due to ongoing processing delays with probate applications, executors are losing the opportunity to claim relief from IHT.”

They added: “The ATT therefore considers that the current 12 month window is too short and needs to be extended to a two-year period, or at least an 18 month period from the date of death, on a permanent or temporary basis.”

In December 2022, the Probate Department were said to have been “infected with a virus” that causes delays, according to Tory peer Baroness Meyer.

She challenged the Government over the department’s mismanagement, arguing that these problems are adding to the stress felt by those bereaved at a time of loss.

Applications for inheritance tax can be made online and take approximately four weeks to be processed, according to data from HM Courts & Tribunals Service. But cases that need to be checked as a result of a query or error take up to 17 weeks.

Applications by post take even longer, with the average submission period taking more than 20 weeks.

The average time between the date of death to a probate application being submitted is usually three to five months, according to advisers. At that point the inheritance tax is payable.

In comparison, housing assets have a much longer claims window than shares. Loss relief can be claimed if a property is sold for less than what it was valued at for inheritance tax within four years from the date of death.

In a statement, HM Courts and Tribunals said: “The death rate has been considerably higher since 2020 causing a surge in probate applications but we are dealing with them in seven weeks on average — almost one week quicker than a year ago.”