Is It Possible To Overpay Inheritance Tax?

Is it possible to overpay on your inheritance tax bill? It may seem as though everything would be calculated exactly when it comes to inheritance tax, and that the bill you pay is the correct one, but that is not always the case. Sometimes it is possible that you have overpaid. However, bear in mind that it can also be possible to underpay the bill. But why does this happen?

Assuming the estate of the deceased is worth more than the inheritance tax (IHT) threshold (currently £325,000), the government will require you to pay a 40 percent tax on anything over that amount. The estate’s executor will have to complete a tax return, and the calculations made at this point will determine what needs to be paid to HMRC. Once this is done, probate can be granted and the assets distributed.

Overpay Inheritance Tax 300x199 Is It Possible To Overpay Inheritance Tax?

However, since this figure needs to be paid straight away, and not wait until the property in question is sold, the calculations could be wrong. It is very common for properties to be up for sale at a certain price, but for the true sale price to be either more or less than that figure. It is more likely that the house will sell for less than the asking price, although more is sometimes possible (particularly if there is a lot of interest, or if it is sold through an auction system). The IHT will already have been paid, though, so when the actual sale figure for the property is confirmed, a new IHT bill will need to be issued. Any overpayments will need to be recovered, and any underpayments will need to be rectified.

If an overpayment has been made then you will need to contact the Capital Taxes Office (CTO) which is part of HMRC. Unfortunately the process of recovering money like this can take many months, even in the most straight forward of cases. This can cause a major impact on the distribution of the rest of the estate, as everyone has to wait until the money is returned. 

Leave a Reply

Contact us


Call us for a quote, instant help or impartial advice on freephone
0800 612 6105 0800 calls are free - 0333 are local rate - Just click to Call

Or complete the form below