Government’s Updated Regulations for Excepted Estates: Simplifying Inheritance Tax Reporting and Reducing Administrative Burden

The Government’s updated regulations for excepted estates have come into force on 1 January this year, aiming to simplify the inheritance tax reporting requirements and reduce the administrative burden of dealing with inheritance tax. However, these amendments have also broadened the criteria for excepted estates, bringing many more estates within the regime.

Bryony Cove, a Partner at Farrer & Co specializing in the probate process, welcomed the updated regulations, stating that they will make the probate process slightly quicker and easier for families following the death of a loved one. However, she noted that the changes only apply to the most straightforward estates, while higher-value matters involving complex assets and family dynamics will still require detailed reporting and professional advice.

The key changes include three categories of excepted estates: low value, exempt, and foreign domiciled. For deaths occurring on or after 1 January 2022, executors of excepted estates will no longer need to file a short-form IHT return, simplifying the process. HMRC will also have 60 days instead of 35 days to request additional information about the estate.

The qualifying criteria for exempt excepted estates have been extended, with increases in the upper limit of the estate’s gross value, trust property, and lifetime gifts. For low value excepted estates, the limits on trust property and lifetime gifts have also been increased.

Overall, these amendments will simplify the probate process for many estates, reducing both the cost and time required for administration. However, it is important to note that high-value and complex estates will still require a full IHT return. Proper care should be taken to ensure the correct reports are made to HMRC for such estates.

The changes will also increase the number of estates that fall within the excepted estates criteria, benefiting many executors who would have previously been required to submit a long-form IHT return. While the new regime simplifies reporting on a first death, it could lead to difficulties on the death of the surviving spouse/civil partner if appropriate records have not been kept.

In conclusion, the updated regulations are a positive step towards streamlining the probate process and reducing the administrative burden for many estates. However, it is essential to seek professional advice for high-value and complex estates to ensure compliance with the new regulations.