Simple vs complex estates

Navigating the tax system when someone you love has passed away can be overwhelming. 

Understanding whether your loved one’s estate is simple or complex will provide you with the starting point to follow the necessary steps to complete the reporting requirements.

In either case, we are here to help and support you from start to finish.

Determine if Inheritance Tax (IHT) is due on the estate

You must send full details of the estate to HMRC if there is Inheritance Tax due, no matter how much.

HMRC has a handy tool to check if IHT is due on the estate. 

Online Estate IHT Checker 

If no Inheritance Tax is due, then it is likely that no reporting will be required. However, please still read the remaining guidance as some estates will still require reporting even when no IHT is due.

Determine if the estate is an excepted estate

An excepted estate includes the following:

• its value is below the current Inheritance Tax threshold, which is currently £325,000
• the estate is worth £650,000 or less, and any unused threshold is being transferred from a spouse or civil partner who died first
• the deceased left everything to a spouse or civil partner living in the UK or to a qualifying charity, and the estate is worth less than £3 million
• the deceased was living permanently outside the UK (a ‘foreign domiciliary’) when they died, and the value of their UK assets is under £150,000.

Determine if full reporting is required

Some estates will still require full reporting even if no tax is due. This will be the case if the person who died:

• gave away over £250,000 in the seven years before they died
• gave gifts, then continued to benefit from them in the seven years before they died
• left an estate worth more than £3 million
• was ‘deemed domiciled’ in the UK
• had foreign assets worth more than £100,000
• was living permanently outside the UK when they died, but had previously lived in the UK
• had a life insurance policy that paid out to someone other than their spouse or civil partner, and had an annuity
• had increased the value of a lump sum from a personal pension to be paid after their death, while they were terminally ill or in poor health
• had agreed that the property they’d given away during their lifetime would be part of their estate rather than pay a pre-owned asset charge.

There will also be reporting requirements if the estate includes Trusts:

• the deceased made a gift to the Trust
• they held assets worth over £250,000 in a Trust
• had more than one Trust.

If the individual’s estate is excepted under the surviving spouse exemption, then full reporting will only be required in relation to a Trust if they are valued at more than £1 million or more than £250,000 has been deducted after the amount passing to the surviving spouse.

Informal reporting	Full reporting
Value is below Nil Rate Band(s).	Value is above twice the available IHT thresholds.
Value is passed to Spouse, Civil Partner, or ‘qualifying’ charity and value between Nil Rate Band and £3 million.	Value above Nil Rate Band and not relieved by Spouse or charity exemption.
Foreign domicile and value less than £150,000.	‘Deemed UK Domicile’ at date of death.
Gifts made within seven years of death below £250,000.	Gifts made within seven years of death valued more than £250,000 or any gift of land to a Trust.
	Gift with Reservation.
	Held property outside the UK valued at more than £100,000.
	Claiming various reliefs such as the transferable Nil Rate Band, Downsizing Relief.
	Benefitted from Trust property valued over £250,000 or had an interest in more than one Trust.

What to do if an estate needs full reporting

Don’t let the name ‘complex’ scare you. Although some estates may be, this is often not the case. This just means there is a more formal procedure to follow.

The main form is called the IHT400, which is sent along with supplemental forms that depend on the types of assets held by the deceased and require detailed information about the estate’s assets, liabilities, and reliefs.

We appreciate that numbers and forms are not everyone’s day-to-day work, and Executors navigating grief and the reporting requirements can become too much. 

Any advice taken by Executors or support is usually borne by the estate and can ensure that matters are dealt with quickly and accurately. 

At Crowe, we pride ourselves on guiding you through each step, explaining clearly and concisely what is required, how and when to collate the necessary information. We will break the process down into manageable steps so that it doesn’t seem quite so overwhelming and put your mind at ease, so you can focus on the other aspects of life.

If you are unsure of the position of your loved one’s estate, please do reach out. We are here to help guide you through this process and make it as easy as possible.

Get in touch with your usual Crowe contact or Natalie Butt to discuss further.