For deaths on or after 1 January 2022 in England and Wales, there is no longer a separate IHT205 form to complete for an excepted estate. The Inheritance Tax information that used to sit on IHT205 is now entered directly into the online probate application at GOV.UK, and the system decides whether the estate qualifies as excepted and therefore owes no Inheritance Tax. The paper IHT205 only still applies to deaths on or before 31 December 2021. The sections below cover what you need to report, how to tell whether the estate qualifies, and the traps that most often turn an “excepted” estate into one that needs the full IHT400.
What Counts as an Excepted Estate
An excepted estate is one where no Inheritance Tax is due, so HMRC does not need a detailed account. The rules come from the Inheritance Tax (Delivery of Accounts) (Excepted Estates) Regulations 2004, as amended, and they sort estates into three categories.1GOV.UK. Inheritance Tax: Reduced Reporting Requirements If the estate fits none of them, you must complete the full IHT400 and send it to HMRC before applying for probate.
Low-Value Estates
A low-value excepted estate is one whose gross value does not exceed the nil-rate band (NRB), currently £325,000 and frozen at that figure through at least the 2029–30 tax year.2GOV.UK. Rates and Allowances: Inheritance Tax Thresholds and Interest Rates The gross value includes the deceased’s share of jointly held assets, not just assets held in their sole name. Where a valid transferable nil-rate band claim is made from a predeceased spouse or civil partner, the gross value can be up to double the NRB (£650,000).3GOV.UK. IHTM06024 – Rules About Excepted Estates: When the Nil Rate Band Is Increased
Exempt Estates
An exempt excepted estate applies when the gross value exceeds the NRB but everything passes to an exempt beneficiary: a UK-domiciled spouse or civil partner, a qualifying charity, or a combination. For deaths on or after 1 January 2022, the gross value can be up to £3 million provided the net chargeable value, after liabilities and the spouse or charity exemption, is nil.4GOV.UK. How to Value an Estate for Inheritance Tax and Report Its Value Where a transferable nil-rate band claim is also made, the gross value can still be up to £3 million, but the net chargeable value must not exceed £650,000.3GOV.UK. IHTM06024 – Rules About Excepted Estates: When the Nil Rate Band Is Increased Even a modest legacy to a non-exempt recipient can push the net chargeable value above that ceiling and knock the estate out of excepted status.
Non-UK Domiciled Deceased
If the deceased was never domiciled in the UK (or was not a long-term UK resident under the newer rules), the estate can qualify as excepted provided the gross value of UK-situated assets is £150,000 or less.5HM Revenue & Customs. IHTM06021 – Rules About Excepted Estates: Foreign Domiciliaries or Non Long-Term UK Residents Overseas assets fall outside UK Inheritance Tax for a non-domiciled person and are excluded from the calculation entirely.
The £250,000 Lifetime Gifts Ceiling
Gifts the deceased made in the seven years before death count as chargeable transfers and can disqualify an otherwise excepted estate. For deaths on or after 1 January 2022, the total value of these “specified transfers” must not exceed £250,000.6GOV.UK. IHTM06018 – Rules About Excepted Estates: Specified Transfers
You can deduct the annual and small gift exemptions, the marriage or civil partnership exemption, and gifts from normal expenditure out of income (up to £3,000 per tax year) before applying the £250,000 test.6GOV.UK. IHTM06018 – Rules About Excepted Estates: Specified Transfers If the net total still exceeds £250,000, you need the full IHT400 even where the estate itself is below the NRB. Gather gift records at the start rather than halfway through the application.
Valuing What You’ll Report
Every asset is valued at its open market value on the date of death: the price it would realistically fetch with a willing buyer. The online application asks for the gross estate value, the net estate value, and the net qualifying value after exempt transfers.
For residential property, use a realistic market appraisal as of the date of death. A written valuation from an estate agent is often sufficient for a straightforward property; higher-value or unusual properties may warrant a surveyor. Record the address, the figure, and how you reached it. For bank, building society, and investment accounts, ask each institution for a “date of death” balance. Shares listed on the London Stock Exchange are valued using the quarter-up rule from the Stock Exchange Daily Official List. Include the deceased’s share of any jointly owned asset.
Personal belongings such as jewellery, vehicles, and collectibles are valued at what they would sell for, not what was paid for them. Modest household contents can take a reasonable estimate; higher-value items should have professional appraisals.
From the gross figure, subtract debts owed at the date of death: mortgages, loans, credit cards, utility bills, and care home fees. Reasonable funeral expenses are also deductible. The result is the net estate value.
Claiming the Transferable Nil-Rate Band
If the first spouse or civil partner to die did not use all of their NRB, the unused portion transfers to the survivor’s estate. Where none was used, the survivor’s threshold rises to £650,000.7GOV.UK. Transferring Unused Basic Threshold for Inheritance Tax Where some was used, you can transfer only the unused percentage, applied to the current £325,000.
The claim is made inside the online probate application rather than filed separately. You will need the date of death and basic estate details of the first spouse, together with the marriage or civil partnership certificate and that spouse’s death certificate.
Claiming the Residence Nil-Rate Band
The residence nil-rate band (RNRB) adds up to £175,000 when a home passes to direct descendants on death, and is frozen at that figure through at least the 2027–28 tax year.8GOV.UK. Inheritance Tax Nil-Rate Band and Residence Nil-Rate Band Thresholds From 6 April 2026 to 5 April 2028 Combined with the standard NRB, an individual threshold can reach £500,000, and a surviving spouse claiming both transferable allowances can reach up to £1 million. That often brings an estate holding a family home within excepted status.
The deceased must have owned a residential property (or share of one) that forms part of the estate and is inherited by a direct descendant. HMRC’s definition covers children, grandchildren, and further lineal descendants, including step-children, adopted children, foster children, and children the deceased was appointed guardian of, plus the spouses and civil partners of those descendants. Nephews, nieces, and siblings do not qualify.9GOV.UK. Work Out and Apply the Residence Nil Rate Band for Inheritance Tax
The RNRB tapers once the total estate value exceeds £2 million, reducing by £1 for every £2 above that threshold, and disappears entirely at around £2.35 million.10GOV.UK. Inheritance Tax Nil-Rate Band, Residence Nil-Rate Band From 6 April 2028 A downsizing addition may preserve part of the allowance where the deceased sold or stopped owning a home before death, provided assets of equivalent value pass to direct descendants.
Submitting the Application
For deaths on or after 1 January 2022 in England and Wales, you enter the Inheritance Tax figures directly into the online probate application at GOV.UK. The system takes the gross estate value, the net estate value, and the net qualifying value after exempt transfers, and determines whether the estate is excepted.11GOV.UK. IHT206 Notes to Help You Fill In Form IHT205 (2011)
Once you complete the application, you print the legal statement (declaration) and sign it. The signed declaration, the original will if there is one, and an official copy of the death certificate are posted to the Probate Registry. The application fee is £300 for estates valued above £5,000, and there is no fee for estates worth £5,000 or less.12GOV.UK. Applying for Probate: Fees The Registry then issues the Grant of Probate (or Grant of Letters of Administration where there is no will), which is the legal authority to access accounts, sell property, and distribute the estate.
For a death on or before 31 December 2021, or where you cannot use the online service, the paper IHT205 is still required and must be posted alongside the probate application.
After Submission: HMRC Review and Penalties
Getting the grant does not close the matter with HMRC. Even for excepted estates, HMRC can open an enquiry if figures look wrong. The standard window for raising an assessment is four years from when tax became due or the last payment was accepted. That extends to six years for careless errors and 20 years for deliberate inaccuracies, and to 12 years where offshore assets are involved.13GOV.UK. Assessing Time Limits: Tables of Time Limits for Relevant Taxes: Inheritance Tax
If HMRC finds the estate was not actually excepted because values were understated or a category was claimed incorrectly, personal representatives become liable for the unpaid tax plus penalties. Under Schedule 24 of the Finance Act 2007, maximum penalties for a domestic error are 30% of the lost tax for a careless mistake, 70% for a deliberate error, and 100% where the inaccuracy was both deliberate and concealed.14UK Parliament. Finance Act 2007, Schedule 24 Voluntary disclosure before HMRC contacts you reduces those figures significantly.
Keep thorough records of every valuation, every gift accounted for, and every exemption claimed. If HMRC comes back years later, that paper trail is what shows how you arrived at your figures.