Excepted estates threshold raised to £3m — IHT400 not always required

The Inheritance Tax (Delivery of Accounts) (Excepted Estates) (Amendment) Regulations 2021 (SI 2021/1167), which came into force on 1 January 2022, significantly expanded the circumstances in which a full IHT400 is not required.

The most important change for solicitors: the gross value threshold for excepted estates was raised from £1m to £3m, provided the estate passes entirely to a surviving spouse or civil partner, or to charity. Where this condition is met and the gross estate does not exceed £3m, only a simple form IHT205 (or IHT207 for foreign domiciliaries) is required — not the full IHT400.

Additionally, the regulations raised the general excepted estates threshold (for estates below the IHT threshold that do not qualify for the spousal/charity exemption) from £1m to £3m gross in England and Wales, provided the estate consists of specified assets only and the net value does not exceed the nil rate band.

In practice, this means a significant proportion of estates that were previously required to submit a full IHT400 no longer need to do so. HMRC estimates that the changes removed the requirement for a full return in around 90% of non-taxpaying estates.

Despite this, many solicitors continue to file IHT400 as a matter of routine for estates above £1m. This creates unnecessary work and cost for clients. Solicitors should review their standard process and confirm whether the excepted estates criteria are met before defaulting to a full return.

The regulations also introduced a requirement to report information about the estate to HMRC even for excepted estates where certain conditions are met — including estates where the deceased made gifts in the seven years before death. Solicitors should ensure the correct reporting obligations are met even where IHT400 is not required.