Families reclaim millions in overpaid inheritance tax

Over the past three years, families have made more than 18,000 claims for overpaid inheritance tax (IHT), according to new figures obtained through a Freedom of Information (FOI) request.

The data, released by NFU Mutual, reveals that more than two-thirds of those claims—12,915—were tied to property sales.

Inheritance tax is calculated based on the value of a deceased person’s estate at the date of death. The tax is typically due within six months, often before key assets such as property are sold. When those assets later sell for less than their probate valuations, families may be entitled to a refund.

The number of IHT reclaims related to property rose by 65% between the 2022-23 and 2024-25 tax years, a trend experts say is largely driven by ongoing market uncertainty.

Steve Bish, founder of S Bish Estate Planning, points to several factors fueling the increase, he said, “Housing market volatility is a big factor. A post-pandemic slowdown in the UK housing market, especially in 2023, resulted in homes selling below their probate valuations. This has led to a spike in claims for the Loss on Sale of Land relief, a tax adjustment that refunds overpaid IHT when properties are sold at a loss within four years of death.

“Another driver has been rising property prices: Although recent years have seen short-term slumps, long-term property price growth has pushed more estates above the £325,000 inheritance tax threshold, or £500,000 when including the residence nil-rate band. As a result, more families have faced higher tax bills up front, only to later sell inherited properties at reduced prices, prompting refund claims.

“Frozen IHT thresholds are impacting claims too.  The IHT nil-rate band (£325,000) and the residence nil-rate band (£175,000) have remained unchanged for years. As estate values rise but tax thresholds remain frozen, more estates are dragged into the IHT net—only to be overvalued in volatile markets and later eligible for reclaims.

“We should also factor in increased awareness. Thanks to improved publicity and advice from estate planners and legal professionals, more executors are now aware that refunds may be available—particularly when selling property or shares after the date of death.

“There is market volatility for shares. Investment markets have also seen sharp fluctuations. There were 5,096 claims over the past three years related to declines in share values within 12 months of death. HMRC’s IHT35 form allows executors to reclaim tax if stocks or investments drop in value and are sold at a loss within a year.

“Finally, ongoing economic shifts and administrative backlogs have added to the issue. Long probate delays often mean IHT is paid based on outdated or estimated valuations, increasing the risk of overpayment when assets later sell at reduced market values.”

NFU Mutual’s data suggests that awareness of reclaim opportunities is growing—but many families may still be unaware they’re eligible for a refund. Executors who sell property or shares at a lower value within the relevant timeframe are encouraged to review their IHT payments and consider applying for a rebate.