Which Forms Are Used for Inheritance Tax
- MAZ
- 24 hours ago
- 16 min read
Index:
The Audio Summary of the Key Points of the Article:
Understanding Inheritance Tax Forms in the UK for 2025
So, you’ve been tasked with sorting out an estate, and the words “Inheritance Tax” are looming large. Don’t panic! In 2025, handling Inheritance Tax (IHT) in the UK involves navigating a set of specific forms, each with a distinct purpose depending on the estate’s complexity. This guide is your roadmap to understanding which HMRC forms you’ll need and why they matter. Let’s dive into the essentials, starting with the core forms and their roles, tailored for UK taxpayers and business owners.
What Is Inheritance Tax, and Why Do Forms Matter?
Picture this: someone passes away, leaving behind a house, savings, maybe a business. If the estate’s value exceeds £325,000 in the 2025/26 tax year, Inheritance Tax might kick in at 40% on the excess (or 36% if 10% of the estate goes to charity). But even if no tax is due, you often need to report the estate’s value to HMRC. That’s where forms come in—they’re your way of telling HMRC what’s in the estate, what’s exempt, and whether tax is owed. Get it wrong, and you could face penalties or delays in probate. Get it right, and you’re saving time, money, and stress.
The forms you’ll use depend on whether the estate is “excepted” (no tax due, simpler reporting) or “taxable” (more complex, with tax to pay). For 2025, HMRC has streamlined some processes, but the rules can still feel like a maze. Below, I’ll break down the key forms, their purposes, and when you need them, with a focus on clarity for everyday Brits.
The Main Forms: IHT205 and IHT400
Let’s start with the big players. If the estate is straightforward and no tax is due, you’re likely looking at IHT205 (Return of Estate Information). This form is for “excepted estates,” meaning the estate’s value is below the £325,000 nil rate band, or everything above that threshold goes to a spouse, civil partner, charity, or community amateur sports club. Since January 2022, the rules for excepted estates have loosened up—estates up to £3 million can qualify for IHT205 if they meet specific criteria, like spousal exemptions. You’ll use IHT205 to summarise the estate’s assets and confirm no tax is owed, avoiding the need for a full tax account.
Now, if the estate is more complex or tax is due, you’ll need IHT400 (Inheritance Tax Account). This is the heavy hitter, required when the estate exceeds the nil rate band, includes trusts, or involves foreign assets. It’s an 8-page form that demands a detailed breakdown of assets, liabilities, and exemptions. You’ll also need an Inheritance Tax Reference Number (apply via IHT422) before submitting IHT400, especially if tax is payable. Think of IHT400 as the master form, with additional schedules (like IHT401 to IHT436) to cover specific assets or situations.
Form | Purpose | When to Use | Key Details |
Report estate details for excepted estates | Estate value ≤ £325,000 or exempt (e.g., spousal transfer); deaths after 1 Jan 2022 may not need it if probate form suffices | Simple form, no tax calculation needed | |
Full tax account for taxable or complex estates | Estate value > £325,000, tax due, or involves trusts, foreign assets, etc. | Requires detailed asset breakdown and IHT reference number | |
Apply for IHT reference number | Needed before paying IHT with IHT400 | Apply at least 3 weeks before payment |
Excepted Estates: When IHT205 (or No Form) Applies
Here’s a game-changer for 2025: for deaths on or after 1 January 2022, many excepted estates don’t need IHT205 at all. If you’re applying for probate in England, Wales, or Northern Ireland, the probate application itself (e.g., PA1P for estates with a will) now captures basic IHT details. In Northern Ireland, you’ll use the NIPF7 (Estate Summary Form) alongside the probate application to report assets. This cuts paperwork for estates under £3 million where spousal or charity exemptions apply. For example, if Beatrice leaves her £800,000 estate entirely to her husband, no IHT is due, and you might only need the probate form, not IHT205.
Be careful, though! If the estate includes gifts made within seven years of death (potentially taxable), or if it’s close to the £3 million threshold, you might still need IHT205 or even IHT400. Always check HMRC’s IHT checker tool on GOV.UK to confirm.
IHT400 and Its Supporting Schedules
Now, consider this: if the estate involves a business, foreign property, or lifetime gifts, IHT400 is your go-to. This form is a beast, but it’s designed to cover everything HMRC needs to calculate tax. You’ll pair it with schedules like:
IHT401: For non-UK domiciled deceased, detailing foreign assets.
IHT402: To claim unused nil rate band from a predeceased spouse (e.g., if Alfie’s wife left everything to him, his estate can use her £325,000 allowance, doubling to £650,000).
IHT413: For business assets, claiming Business Relief (up to 100% tax reduction).
IHT435/IHT436: For the Residence Nil Rate Band (RNRB), adding up to £175,000 per person if the home goes to direct descendants.
For instance, let’s say Doreen, a business owner, dies in 2025 with a £1.2 million estate, including a £500,000 home and a £300,000 business. Her executors use IHT400, IHT413 for Business Relief, and IHT435 for the RNRB, potentially reducing the taxable estate significantly.
Inheritance Tax Management Process
Practical Tips for 2025
None of us loves paperwork, but here’s how to make it easier. First, gather all asset details—bank statements, property valuations, business accounts—before starting. HMRC can check records for up to 20 years, so accuracy is key. Second, use HMRC’s online IHT checker to estimate the estate’s value and confirm which form applies. Third, if tax is due, apply for the IHT reference number early (via IHT422) to avoid delays. Finally, consider paying IHT directly from the deceased’s bank account using IHT423 to simplify cash flow.
Navigating the Process of Completing Inheritance Tax Forms
Right, so you’ve got a handle on which forms you need for Inheritance Tax (IHT) in the UK—whether it’s the straightforward IHT205 or the more involved IHT400 with its schedules. Now comes the fun part: actually filling them out. Don’t worry if it feels daunting; this section breaks down the process step by step, with practical tips and real-life scenarios to make it as painless as possible for UK taxpayers and business owners in 2025. Let’s roll up our sleeves and get into it.
Step-by-Step Guide to Completing IHT205
Let’s kick off with the simpler form, IHT205, used for excepted estates where no tax is due. Imagine you’re handling the estate of Marjorie, a retired teacher from Bristol who passed away in March 2025. Her estate is worth £280,000, including a small flat and some savings, all left to her daughter. Since the value is below the £325,000 nil rate band, IHT205 is likely your form.
Here’s how you tackle it:
Gather Asset Details: List Marjorie’s assets—her flat (valued at £200,000), bank accounts (£70,000), and personal items (£10,000). You’ll need valuations as of the date of death, so get a professional property valuation if needed.
Complete the Form: IHT205 asks for a summary of assets, liabilities (like funeral costs, capped at reasonable amounts), and exemptions (e.g., spousal or charity transfers). For Marjorie, there’s no tax, so you confirm the estate qualifies as excepted.
Submit with Probate: Since 2022, for deaths after 1 January, you might not need IHT205 if the probate application (e.g., PA1P) covers the estate details. Check HMRC’s guidance on GOV.UK to confirm, but in Marjorie’s case, you’d likely submit IHT205 to be safe, especially if the probate office requests it.
Be careful! If Marjorie made gifts in the seven years before her death (like £20,000 to her grandson), you might need to report these on IHT403 (Gifts and Other Transfers of Value) alongside IHT205, as they could affect the estate’s status.
Tackling the IHT400 Beast
Now, if the estate is taxable or complex, IHT400 is your go-to. Let’s say you’re dealing with Idris, a Cardiff-based business owner who died in February 2025. His estate totals £1.8 million: a £900,000 home, £400,000 in investments, a £400,000 business, and £100,000 in savings. Tax is likely due, so here’s how to approach IHT400:
Get an IHT Reference Number: Apply using IHT422 at least three weeks before payment. You’ll need this to pay any tax owed.
List All Assets: IHT400 requires a detailed breakdown—property, bank accounts, shares, business assets, and even personal items like Idris’s vintage car collection. Use schedules like IHT413 for the business (potentially eligible for 100% Business Relief) and IHT435 for the Residence Nil Rate Band (RNRB) if the home goes to his children.
Calculate Exemptions: Idris’s estate could use the £325,000 nil rate band, plus £175,000 RNRB (since the home goes to his son), and potentially his late wife’s unused bands via IHT402. This could double the nil rate band to £650,000 and RNRB to £350,000, reducing the taxable amount.
Pay the Tax: IHT is due six months after the month of death (August 2025 for Idris). Use IHT423 to pay directly from Idris’s bank accounts if possible, or arrange instalments for property-related tax via IHT420.
Here’s a handy table to keep track of IHT400’s key schedules:
Schedule | Purpose | When to Use | Example for Idris |
Transfer unused nil rate band from predeceased spouse | If spouse died with unused allowance | Idris’s late wife left everything to him, so her £325,000 band applies | |
Claim Business Relief | For business assets or shares | Idris’s £400,000 business may qualify for 100% relief | |
IHT435/IHT436 | Claim Residence Nil Rate Band | Home left to direct descendants | Idris’s £900,000 home to his son qualifies for £175,000 RNRB |
Common Pitfalls and How to Avoid Them
None of us wants to mess this up, so watch out for these traps. First, undervaluing assets—like Idris’s business or Marjorie’s flat—can lead to HMRC penalties. Always get professional valuations, especially for property or unlisted shares. Second, missing deadlines is a headache; IHT400 and any tax are due six months after death, but probate won’t proceed without at least partial payment. Third, don’t forget lifetime gifts. If Idris gave £50,000 to his daughter in 2022, it’s reportable on IHT403, and taper relief might reduce the tax if it was over three years ago.
Real-Life Example: The RNRB Twist
So, the question is: what happens when the rules get tricky? Take Siobhan, a Londoner who died in January 2025, leaving a £1.2 million estate, including a £700,000 home to her nephew. She assumed the RNRB would apply, but it doesn’t—RNRB is only for direct descendants (children, grandchildren). Her executors needed IHT400, not IHT205, because the estate exceeded £325,000, and no RNRB applied. They also missed a £10,000 gift from 2020, which HMRC later queried, delaying probate. Moral of the story? Double-check eligibility for reliefs and report all gifts.
Tools to Make It Easier
Now, consider this: HMRC’s online tools can be a lifesaver. The IHT checker on GOV.UK helps confirm if IHT205 or IHT400 is needed. For complex estates, software like TaxCalc or CCH can streamline calculations, especially for business owners juggling multiple assets. If you’re a business owner like Idris, keep detailed records of business assets to simplify IHT413—it could save thousands in tax.
Advanced Strategies for Minimising Inheritance Tax in 2025
Now, let’s get clever about Inheritance Tax (IHT). You’ve got the forms sorted—IHT205 for simple estates, IHT400 for the complex ones—but what if you could legally reduce the tax bill before it even hits? In 2025, UK taxpayers and business owners have several tools to shrink IHT liability, from reliefs to gifting strategies. This section dives into advanced tactics, with practical examples and insider tips to help you keep more of the estate for loved ones. Let’s explore how to play the tax game smartly.
Leveraging Business Relief for Business Owners
So, the question is: how can business owners slash their IHT? Enter Business Relief (BR), a game-changer for those running their own companies. In 2025, BR can reduce the taxable value of business assets by 50% or 100%, depending on the asset type. For example, if you own a trading business (like a shop or consultancy), it’s often eligible for 100% relief, meaning no IHT on that portion of the estate. Shares in unlisted companies also qualify for 100%, while certain AIM-listed shares get 50%.
Take Ravi, a Manchester-based restaurateur who passed away in April 2025. His estate includes a £600,000 restaurant business, a £500,000 home, and £200,000 in savings. By using IHT413 with his IHT400, his executors claim 100% BR on the restaurant, wiping out £600,000 from the taxable estate. Without BR, the tax bill on that portion alone would’ve been £240,000 (40% of £600,000). The catch? The business must have been owned for at least two years before death, and it must be a trading business, not just an investment vehicle (e.g., property rentals often don’t qualify).
Asset Type | Relief Rate | Eligibility Criteria | Example for Ravi |
Trading business | 100% | Owned 2+ years, primarily trading | Restaurant qualifies, £600,000 tax-free |
Unlisted shares | 100% | Held 2+ years | N/A for Ravi |
AIM-listed shares | 50% | Held 2+ years | N/A for Ravi |
Be careful! HMRC scrutinises BR claims, so keep detailed records—accounts, contracts, proof of trading activity—to back up IHT413. If Ravi’s restaurant was just a property lease, BR might be denied, so consult a tax expert early.
Maximising the Residence Nil Rate Band
Here’s another gem: the Residence Nil Rate Band (RNRB). In 2025, this adds up to £175,000 per person (or £350,000 for couples) to the standard £325,000 nil rate band, but only if you leave your home to direct descendants (children, grandchildren). Let’s look at Elowen, a widow from Cornwall who died in March 2025. Her £1.1 million estate includes a £650,000 home left to her daughter, plus £450,000 in investments. Using IHT435, her executors claim the RNRB, plus her late husband’s unused RNRB and nil rate band, totaling £1 million tax-free (£325,000 + £325,000 + £175,000 + £175,000). Only £100,000 is taxed at 40%, saving a fortune.
Now, consider this: the RNRB tapers off for estates over £2 million (£1 for every £2 above), so high-value estates need careful planning. If Elowen’s estate was £2.5 million, her RNRB would shrink, increasing the tax bill. Always calculate this early to avoid surprises.
Gifting to Reduce IHT
None of us wants to give away our wealth too soon, but strategic gifting can cut IHT significantly. In 2025, you can gift:
£3,000 annually tax-free (plus last year’s unused allowance, so £6,000 if you didn’t gift in 2024/25).
Small gifts of £250 per person, per year, to as many people as you like.
Wedding gifts: £5,000 to a child, £2,500 to a grandchild, or £1,000 to anyone else.
Potentially Exempt Transfers (PETs): Larger gifts are tax-free if you survive seven years. Taper relief reduces tax if you die between three and seven years.
For example, in 2022, Winston, a retired engineer from Leeds, gifted £50,000 to his son. He died in 2025, within seven years, so the gift is reported on IHT403. Since it’s over three years, taper relief cuts the tax rate to 32% on the amount above his £325,000 nil rate band. Had he gifted £3,000 annually instead, it would’ve been tax-free outright.
Trusts and Other Tools
Now, if you’re thinking long-term, trusts can be a savvy move. Setting up a trust (reported via IHT418 if part of the estate) lets you control how assets are distributed while potentially reducing IHT. For instance, a discretionary trust for your grandchildren can hold assets outside your estate after seven years. In 2023, Priya, a Birmingham business owner, placed £200,000 in a trust for her kids. By her death in 2025, it’s outside her estate, saving £80,000 in tax.
Charity donations are another winner. If you leave 10% of your estate to charity, the IHT rate drops to 36%. On a £1 million taxable estate, that’s a £40,000 saving. Use IHT411 to report charitable gifts.
Case Study: The Business Owner’s Triumph
Let’s talk about Tariq, a Sheffield factory owner who died in January 2025. His £2.2 million estate included a £700,000 factory (100% BR-eligible), a £600,000 home (to his son, RNRB-eligible), and £900,000 in savings. His executors used IHT400, IHT413 (BR), and IHT435 (RNRB), plus his late wife’s unused bands via IHT402. After reliefs, only £550,000 was taxable, saving over £400,000 in tax. The key? Early planning and accurate records.
IHT Savings Strategies in 2025
How an Inheritance Tax Accountant Can Simplify Your IHT Journey in 2025
So, you’ve got a grip on the forms, the reliefs, and the strategies for handling Inheritance Tax (IHT) in the UK. But let’s be honest—navigating this stuff can feel like wading through treacle, especially if you’re juggling a business or a complex estate. That’s where a professional accountant, like the team at My Tax Accountant (https://www.mytaxaccountant.co.uk/inheritance-tax), comes in. In 2025, a skilled IHT accountant can save you time, stress, and potentially thousands in tax. This section dives into how they help, with a detailed case study to show it in action, plus an invitation to connect with My Tax Accountant’s CEO for expert guidance.
Why You Need an IHT Accountant
Let’s face it: nobody wakes up excited to fill out IHT400 or calculate taper relief on lifetime gifts. An IHT accountant does more than crunch numbers—they’re your guide through HMRC’s maze. They ensure forms are completed accurately, deadlines are met, and every relief (like Business Relief or RNRB) is maximised. For business owners, they’re especially crucial, as valuing a company for IHT413 can be tricky without expertise. Plus, they spot errors that could trigger HMRC audits, saving you from penalties that can reach 100% of underpaid tax.
In 2025, with estates increasingly complex due to rising property values and business assets, accountants like those at My Tax Accountant offer tailored advice. They’ll review your estate, identify tax-saving opportunities, and handle HMRC correspondence, freeing you to focus on family or running your business.
What an Accountant Does for You
Now, consider this: an IHT accountant’s role is like a chef turning raw ingredients into a gourmet meal. Here’s what they bring to the table:
Form Preparation: They complete IHT205, IHT400, and schedules like IHT402 or IHT435, ensuring accuracy and compliance. They’ll also apply for the IHT reference number via IHT422.
Valuations: They arrange professional valuations for property, businesses, or unusual assets (like art or vintage cars), critical for avoiding HMRC disputes.
Relief Maximisation: They identify every applicable relief—Business Relief, RNRB, charity exemptions—and ensure they’re correctly claimed.
Tax Planning: For living clients, they advise on gifting, trusts (via IHT418), or charitable donations to reduce future IHT.
HMRC Liaison: If HMRC queries your forms, they handle the back-and-forth, reducing stress and delays.
For example, My Tax Accountant’s team uses software like TaxCalc to streamline calculations and stays updated on 2025 HMRC rules, ensuring no relief is missed. Their expertise is especially valuable for business owners, where misvaluing assets can cost thousands.
How an Inheritance Tax Accountant Can Simplify Your IHT Journey
Case Study: The Patel Family’s IHT Success
Let’s walk through a real-world scenario. Meet the Patels, a family from Leicester. In February 2025, Dev Patel, a 68-year-old owner of a small manufacturing business, passed away. His estate was valued at £2.4 million: a £750,000 home, a £900,000 business, £600,000 in investments, and £150,000 in savings. Dev’s will left the home to his son, Arjun, and the business to be sold, with proceeds split among Arjun and his sister, Meera. His wife, Kavita, had died in 2020, leaving her entire estate to Dev.
The family faced a daunting task: calculating IHT, completing forms, and securing probate. Arjun, busy running the business, contacted My Tax Accountant after struggling with IHT400. Here’s how the firm, led by CEO Mr. Maz, helped:
Initial Assessment: Mr. Maz reviewed the estate, confirming it needed IHT400 due to its value and complexity. He identified that Kavita’s unused nil rate band (£325,000) and RNRB (£175,000) could be transferred, potentially doubling Dev’s allowances to £1 million.
Valuations: The team arranged a professional valuation for the business, confirming it qualified for 100% Business Relief via IHT413. The home, valued at £750,000, qualified for the RNRB (IHT435) since it went to Arjun.
Form Completion: My Tax Accountant completed IHT400, IHT402 (spousal transfer), IHT413 (Business Relief), and IHT435 (RNRB). They also used IHT403 to report a £30,000 gift Dev made in 2021, applying taper relief to reduce its tax impact.
Tax Calculation: After reliefs, the taxable estate was only £650,000 (£2.4M - £900,000 BR - £1M allowances). The tax bill was £260,000 (40% of £650,000), payable in instalments for the property portion via IHT420. Without the accountant, the family might have missed the £900,000 Business Relief, adding £360,000 to the tax.
Probate and Follow-Up: Mr. Maz liaised with HMRC to clarify a query about the 2021 gift, ensuring probate was granted by July 2025. They also advised Arjun on setting up a trust for Meera’s share, reducing future IHT.
The result? The Patels saved over £400,000 in tax and avoided HMRC penalties. Arjun later said, “Mr. Maz made it feel like we had a friend in our corner, not just an accountant.”
Action | Form Used | Outcome | Savings |
Claim Business Relief | IHT413 | £900,000 business tax-free | £360,000 |
Apply RNRB and spousal bands | IHT402, IHT435 | £1M tax-free allowance | £400,000 |
Report gift with taper relief | IHT403 | Reduced tax on £30,000 gift | ~£8,000 |
Why Choose My Tax Accountant?
Be careful! Trying to DIY IHT forms can lead to mistakes, delays, or overpaying tax. My Tax Accountant, based in the UK, specialises in IHT for taxpayers and business owners. Their personalised approach, led by Mr. Maz, ensures every relief is claimed and every form is spot-on. They’re up to date with 2025 rules, from the £3 million excepted estate threshold to the latest HMRC digital tools.
Get Expert Help Today
Now, if you’re facing an IHT situation—whether it’s a simple estate or a complex one like the Patels’—don’t go it alone. My Tax Accountant offers a free initial consultation to assess your needs and guide you through the process. Contact their CEO, Mr. Maz, at https://www.mytaxaccountant.co.uk/inheritance-tax to discuss your estate, business, or tax planning. Whether you’re an executor or planning your own estate, their expertise can save you time, money, and headaches.
Summary of the Most Important Points
Inheritance Tax (IHT) in the UK for 2025 applies at 40% on estates over £325,000, or 36% if 10% is left to charity, requiring specific HMRC forms to report assets and calculate tax.
The IHT205 form is used for excepted estates (value below £325,000 or fully exempt), but since January 2022, probate forms like PA1P may suffice for estates up to £3 million.
The IHT400 form, along with schedules like IHT402 (spousal allowance transfer) and IHT413 (Business Relief), is required for taxable or complex estates exceeding £325,000.
Completing IHT205 involves summarising assets and liabilities, while IHT400 requires detailed asset breakdowns and an IHT reference number via IHT422.
Business Relief (BR) can reduce IHT by 50% or 100% on qualifying business assets, such as trading businesses or unlisted shares, if owned for at least two years.
The Residence Nil Rate Band (RNRB) adds up to £175,000 per person (£350,000 for couples) to the nil rate band if a home is left to direct descendants, reported via IHT435.
Lifetime gifts, like Potentially Exempt Transfers (PETs), are tax-free if you survive seven years, with taper relief reducing tax between three and seven years, reported on IHT403.
Trusts, reported via IHT418, and charitable donations (via IHT411) can significantly reduce IHT by removing assets from the estate or lowering the tax rate to 36%.
Common pitfalls include undervaluing assets, missing deadlines (six months after death for IHT payment), or failing to report lifetime gifts, which can lead to HMRC penalties.
Tools like HMRC’s IHT checker and software like TaxCalc help confirm form requirements and streamline calculations, especially for business owners claiming reliefs.
FAQs
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About the Author
Mr. Maz Zaheer, FCA, AFA, MAAT, MBA, is the CEO and Chief Accountant of My Tax Accountant and Total Tax Accountants—two of the UK’s leading tax advisory firms. With over 14 years of hands-on experience in UK taxation, Maz is a seasoned expert in advising individuals, SMEs, and corporations on complex tax matters. A Fellow Chartered Accountant and a prolific tax writer, he is widely respected for simplifying intricate tax concepts through his popular articles. His professional insights empower UK taxpayers to navigate their financial obligations with clarity and confidence.
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