The number of families who have reclaimed inheritance tax due to falling share prices has soared in the past two years, new figures have revealed.

Over 1,850 families reclaimed overpaid inheritance tax because of falling share values in the 2019/20 tax year, up almost 1,000 from the 858 who did so in 2017/18.

The figures were obtained by a Freedom of Information request from financial advice firm NFU Mutual, who predict the number will climb further.

Sean McCann, Chartered Financial Planner at NFU Mutual, said: “These figures show more people are becoming aware that they can reclaim overpaid inheritance tax. Following the recent falls in the stock market it’s likely that many more bereaved families will be able to benefit.

“Inheritance tax can also be reclaimed when houses are sold at a lower value within four years of death. With Coronavirus potentially impacting house prices, it’s important that families are aware of this ability to reclaim which could save them thousands of pounds.’’

IHT is assessed on the value of a person’s estate on the date of death and the tax must normally be paid within six months.

However, when executors come to sell any quoted shares (or other qualifying investments including unit trusts and OEICs) if the price has fallen, they can reclaim the overpaid tax by submitting an IHT35 form to HMRC.

Families can reclaim overpaid inheritance tax on the value of qualifying shares and investments sold in the 12 months after death.

Following the stock market crash in February and March, many executors will be able to make a claim, NFU Mutual believes. The tax relief is not automatic and has to be pro-actively reclaimed.

NFU Mutual warned that there are a number of ‘traps’ to look out for. The sale of the shares must be made by the ‘appropriate person’, normally the executor, and if shares have been passed to members of the family who then sell at a loss they cannot reclaim.

All the shares sold by the executor are aggregated, so if some have gone up in value this will reduce the amount of IHT that can be reclaimed.

NUMBER OF ESTATES RECLAIMING INHERITANCE TAX

Source: NFU Mutual / HMRC