Can I Reclaim Overpaid Inheritance Tax? How to Recover Excess IHT from HMRC

Inheritance Tax (IHT) is one of the UK’s most complex and emotional taxes - and not just because of the 40% rate.

Executors and families often rush to value assets and pay the bill under time pressure, only to discover months later that they may have overpaid. This naturally leads to the question:

“Can I reclaim overpaid inheritance tax?”

The good news is: yes, you can - and in many cases, you should.

At Belgravia Capital Wealth Management, we often support families in identifying overpaid IHT and making successful claims to HMRC.

In this detailed guide, we explain when and how IHT can be reclaimed, what documentation is required, key deadlines to meet, and how to prevent overpayment in the first place.

Let’s explore how to recover what’s rightfully yours.

Understanding How Inheritance Tax Is Paid

Inheritance Tax is due six months after the end of the month in which the deceased died, and usually must be paid before probate is granted.

Key points:

• It is paid based on estimated valuations of assets at the date of death

• If those assets are later sold for less than their estimated value, you may have paid too much

• HMRC provides mechanisms to reclaim excess IHT — but you must apply, and you must do it on time

Common Reasons for Overpaying IHT

1. Falling Property Values

If a property is sold within 4 years of the date of death for less than its probate value, you may be entitled to reclaim the IHT paid on the difference.

2. Falling Share Values

If quoted shares are sold within 12 months of death for less than their probate value, the IHT paid on those shares can be recalculated and refunded.

3. Incorrect Valuations

Sometimes, asset values are overestimated at the time of the IHT return. Later, a professional valuation may reveal a lower figure. If HMRC accepts this, you may reclaim tax.

4. Gifts and Trust Errors

If gifts or trusts were included incorrectly in the estate’s value (e.g. they fall outside the 7-year rule), the estate may be due a refund.

5. Deductions Not Applied

If debts, funeral costs, or reliefs (such as business or agricultural relief) weren’t claimed, you may be able to amend the IHT return and reclaim tax.

How to Reclaim Overpaid IHT on Property Sales

This is the most common scenario.

Example:

• A property was valued at £1.2 million on the date of death

• It was sold 18 months later for £1 million

• IHT was paid at 40% on the original value

• That’s £80,000 more than necessary

How to reclaim:

• Complete Form IHT38: “Claim for relief – loss on sale of land”

• Provide details of the sale and evidence of the lower sale price

• Submit within 4 years of the date of death

Note: You can’t reclaim tax if the property is sold to a connected person (e.g. family member).

How to Reclaim Overpaid IHT on Share Sales

This applies only to listed or quoted shares — not private company shares.

Example:

• Shares were valued at £500,000 on death

• Sold within 12 months for £400,000

• You paid IHT on the higher value — potentially overpaying £40,000

How to reclaim:

• Complete Form IHT35: “Claim for relief – loss on sale of shares”

• Include all relevant sale transactions and supporting documents

• Submit within 12 months of the date of death

Only the executor can submit this claim, and the shares must be sold on the open market.

Correcting Errors in the IHT Return (Form IHT400)

If your IHT return included errors — such as:

• Duplicate valuations

• Miscalculated lifetime gifts

• Missed reliefs

You can correct the return by writing to HMRC’s Inheritance Tax Office, including:

• A revised calculation

• Supporting evidence (e.g. a new professional valuation)

• A covering letter explaining the mistake

There is no set form for this, but clear communication is essential.

Reclaiming Overpaid IHT on Gifts

If a gift was mistakenly taxed - for instance:

• It was believed to be within 7 years but wasn’t

• It was exempt (e.g. regular gift out of income)

• It qualified for spouse, charity, or business relief

You may be able to amend the estate value and reclaim the associated tax.

This usually requires:

• A detailed explanation

• Supporting documents (bank records, letters of intent, etc.)

• Possibly a deed of variation (if applicable)

Time Limits for Reclaiming IHT

HMRC sets strict deadlines for IHT refund claims:

If you miss these deadlines, your claim will be rejected - even if it’s valid.

How Long Do IHT Refunds Take?

HMRC typically processes IHT refund claims within 6 to 12 weeks, but it can vary based on:

• The complexity of the estate

• The volume of claims

• The quality and completeness of your submission

To speed things up:

• Ensure all forms are fully and accurately completed

• Include sale documents, valuations, and proof of ownership

• Respond promptly to any follow-up queries

Can Interest Be Claimed on Overpaid IHT?

Yes. If HMRC held your money longer than they should have, you may be entitled to repayment interest.

Rates fluctuate (currently around 3.5% to 4%) and are paid from the date of overpayment to the date of refund. This won’t make up for delays, but it’s a useful bonus.

Preventing IHT Overpayment in the First Place

Prevention is better than cure. To avoid overpaying IHT:

• Use professional valuations for property and assets

• Wait to sell volatile assets (e.g. shares) until values are stable

• Ensure your executor uses all available reliefs

• Get expert help in completing the IHT400 accurately

• Don’t rush to pay IHT before assets are properly valued

Remember: once you pay, it’s harder to reclaim - and HMRC won’t chase you to return money.

Common Mistakes When Trying to Reclaim IHT

• Missing the time limit (especially for share sales)

• Trying to claim on unsold assets

• Claiming after selling to a family member

• Using the wrong form or incomplete documentation

• Failing to amend the IHT400 formally

Professional advice can help you avoid these pitfalls.

How Belgravia Capital Wealth Management Can Help

At Belgravia Capital, we:

• Review IHT returns and asset sales for reclaim opportunities

• Prepare and submit IHT35, IHT38, and amendment letters

• Liaise directly with HMRC on your behalf

• Support professional valuations and documentation

• Integrate IHT recovery into your overall estate strategy

Whether you’re managing a large estate or tying up final affairs, we’ll help you recover what’s rightfully yours — and protect future generations.

Conclusion: Can You Reclaim Overpaid Inheritance Tax?

Yes - and in many cases, you should.

If asset values fall after death, or errors were made in your IHT return, you may be entitled to a significant refund. But the window to claim is limited, and the process requires accuracy and clarity.

If you suspect you’ve overpaid, or want help reviewing a past estate:

Contact Belgravia Capital Wealth Management today at contact@belgraviacapital.co.uk for expert guidance on reclaiming inheritance tax.