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Correctly identifying and deducting the deceased's debts is one of the most important steps in preparing an IHT400. Every genuine liability reduces the taxable estate, directly lowering the inheritance tax bill — but HMRC applies strict rules about which debts are allowable, and errors (in either direction) can cause problems.
IHT419 is the supplementary schedule to the IHT400 used to give HMRC more detail about certain debts. It is not the place where every liability is listed. The deductions themselves are made on the IHT400: box 80 for mortgages and secured loans, box 81 for funeral expenses, box 82 for everything else.
The basic principle is simple: the estate inherits not just the deceased's assets, but also their liabilities. Just as the estate must pay off a mortgage before the beneficiaries receive the property, those debts reduce the value available for inheritance — and therefore the IHT due.
The IHT400 notes are specific about when this schedule is needed. Fill in IHT419 to give details of:
It also covers liabilities tied to a life assurance policy or investment bond whose value is not fully reflected elsewhere in the IHT400, and the special case where the deceased both made a gift to someone and later borrowed from that same person.
Mortgages do not go on IHT419. The notes say it plainly: “You do not need to fill in Schedule IHT419 if the debt is a mortgage secured against a property shown in Schedule IHT405… Instead the mortgage should be shown in box 80 on form IHT400.” Nor do ordinary bills and credit cards — those are listed directly at box 82.
These are all deductible from the estate provided they were genuinely owed at the date of death and are actually repaid out of it. Most of them are entered at box 82 of the IHT400 rather than on IHT419 — only the loans need the schedule:
HMRC applies significantly greater scrutiny to debts owed to family members, friends, or connected parties. The concern is that artificial debts could be constructed to reduce the taxable estate without representing genuine liabilities.
To have a family loan accepted as an allowable deduction on IHT419:
The statutory bar, though, is not about how commercial the loan looked. For deaths on or after 17 July 2013 the IHT400 notes set out two conditions: what the borrowed money was used for, and whether the money is actually repaid from the estate. A debt has to be repaid out of the estate’s assets before it can be deducted — “if you know that a debt is not going to be repaid, or only partly repaid, you should not include the debt on the form, or only include the part that will be repaid”. A family loan nobody intends to call in fails on that ground, whether or not it was documented. The narrow exceptions — a real commercial reason for not repaying, where not repaying gives no tax advantage — have to be explained at box 6 of IHT419 or in the additional information boxes of the IHT400.
Separately, money borrowed to acquire, maintain or enhance excluded property cannot be deducted at all — that one applies whether the debt is repaid or not.
Box 2 of IHT419 asks you to “provide copies of any written evidence of the loan”, to state the purpose of the loan and where the money is reflected in the value of the estate. So keep correspondence, bank transfer records and any loan agreement. Where a family loan was informal and undocumented, the practical question is whether it will in fact be repaid from the estate — that is what the deduction turns on.
The following are not deductible on IHT419:
For each debt claimed on IHT419, you should obtain a statement from the creditor confirming the balance at the date of death. This is important — the current balance will differ from the date-of-death balance as interest may have accrued and charges may have been applied after the death.
For each debt, note:
Debts attached to jointly owned assets are dealt with on IHT404, ‘Jointly owned assets’, alongside the asset itself, rather than being split off here.
Funeral costs are deductible from the estate for IHT purposes, but they are declared on the IHT400 main form, not on IHT419.
HMRC allows a deduction for reasonable funeral expenses under section 172 of the Inheritance Tax Act 1984. There is no published figure for what counts as reasonable, and no band above which a claim is challenged. What HMRC tells its own caseworkers (IHTM10371) is to “generally accept the deduction claimed without enquiry” unless the expenses look “wholly unreasonable or large in relation to the estate as a whole”, or are inconsistent with the rest of the file — in which case they ask for an itemised breakdown. So keep the invoices rather than trying to stay under a number that does not exist.
The IHT400 notes list what box 81 covers: funeral costs, reasonable mourning expenses, the cost of a headstone or tombstone marking the grave, and a reasonable amount for:
Not allowable: the travelling and accommodation costs of mourners, which HMRC says are not generally allowed (IHTM10375), and the cost of ordinary clothes such as a dark suit that can be worn again.
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