IHT205 Form Guide - Inheritance Tax for Estates

Inheritance tax reporting is one of the most confusing parts of the probate process, partly because the rules changed significantly in 2022. For deaths on or after 1 January 2022: if the estate qualifies as an excepted estate, no separate inheritance tax form is required - you declare this on the probate application itself. If the estate does not qualify (typically because it exceeds the nil-rate band or has complex features), you complete form IHT400 and submit it to HMRC before applying for probate. This guide explains both routes clearly.

What was the IHT205?

Before January 2022, executors of estates below the nil-rate band were required to complete form IHT205 - a shorter, simplified inheritance tax return. The form required details of all assets, liabilities, and the estate value, and was submitted to HMRC as part of the probate process. For most simple estates it was a 4–8 page form with fairly straightforward questions.

The IHT205 was separate from form IHT400, which was (and remains) the full inheritance tax form for larger and more complex estates.

What replaced the IHT205?

From 1 January 2022, HMRC simplified the process for estates that qualify as "excepted estates." An excepted estate is one that meets certain criteria meaning a full inheritance tax return is not required. For deaths on or after this date:

• Excepted estates no longer need to complete any separate inheritance tax form
• Instead, personal representatives simply confirm on the probate application that the estate qualifies as an excepted estate
• The detailed information that used to go on the IHT205 is still collected, but much of it is now reported directly to HMRC through a simplified process integrated into the probate application

In practical terms, if you are administering a straightforward estate where the person died on or after 1 January 2022, the inheritance tax step has become significantly simpler for most people.

What is an excepted estate?

An estate qualifies as an excepted estate if it meets all of the following conditions:

• The person died domiciled in the United Kingdom
• The estate value does not exceed £325,000 (the nil-rate band), or
• The estate value does not exceed £650,000 and the entire nil-rate band is being transferred from a late spouse or civil partner (the "transferred nil-rate band"), or
• The estate consists entirely of assets passing to a surviving spouse, civil partner, or charity (these are exempt from inheritance tax regardless of value)

There are also qualifying criteria about the types of assets in the estate - trusts, foreign assets, and certain gifts made in the seven years before death can take an estate outside the excepted estate rules even if the value is below the threshold.

What if the estate is not an excepted estate?

If the estate does not meet the excepted estate criteria - typically because the value exceeds the nil-rate band, or there are complex assets - you must complete form IHT400. This is a comprehensive 16-page form with multiple supplementary schedules covering everything from business assets (IHT413) to jointly owned property (IHT404) to gifts (IHT403).

The process for non-excepted estates is:

1. Complete IHT400 and all required supplementary schedules
2. Submit to HMRC (not to the Probate Registry)
3. Pay any inheritance tax due, or arrange an instalment plan for property
4. HMRC reviews the form - currently taking around 20 weeks
5. HMRC issues a receipt and a reference number
6. Use this reference number to complete the probate application

This 20-week HMRC processing time is the single biggest cause of delay in probate for larger estates. You cannot apply for probate until HMRC has confirmed receipt and provided the reference number, so starting the IHT400 process as early as possible is important.

Inheritance tax rates and thresholds

The key figures for inheritance tax in 2025/26 are:

• Nil-rate band: £325,000 per person (frozen until at least 2028)
• Residence nil-rate band: up to £175,000 when a main residence is left to direct descendants (children, grandchildren)
• Standard rate: 40% on the value above the nil-rate band
• Reduced rate: 36% if 10% or more of the net estate is left to charity
• Spouse/civil partner exemption: transfers between spouses are completely exempt from inheritance tax, regardless of value

Married couples and civil partners can combine their nil-rate bands - when the first person dies, any unused nil-rate band is transferred to the survivor, meaning the surviving partner's estate may benefit from up to £1,000,000 in combined thresholds (£325,000 + £175,000 each).

Seven-year rule and gifts

Gifts made by the deceased during their lifetime may be relevant to the estate's inheritance tax position. Gifts made more than seven years before the date of death are generally exempt. Gifts made within seven years of death may be "potentially exempt transfers" (PETs) that become taxable if the person dies, with taper relief reducing the tax if the gift was made three to seven years before death.

Significant lifetime gifts are one reason an estate can fall outside the excepted estate rules even where the remaining estate value is below the nil-rate band. If the deceased made substantial gifts in their final seven years, take advice before assuming the estate is an excepted estate.

Paying inheritance tax

Any inheritance tax due must be paid to HMRC within six months of the end of the month in which the person died - known as the "six-month rule." Interest accrues on unpaid tax after this deadline, even if the Probate Registry has not yet issued the grant.

For property, tax can be paid in annual instalments over ten years (with interest), which helps in situations where the estate is asset-rich but cash-poor. Banks and building societies are generally willing to release funds specifically to pay inheritance tax before probate is granted, on production of the relevant HMRC payment reference.

When to get professional advice

For straightforward excepted estates, there is no inheritance tax work to do beyond confirming the position on the probate application. Consider getting professional advice if:

• The estate value is close to or above the nil-rate band and you are unsure whether it qualifies as an excepted estate
• The deceased made significant gifts in the seven years before death
• The estate includes assets held in trust, foreign property, or business interests
• You need to complete an IHT400 - the supplementary schedules are complex and errors can delay probate by months
• You are unsure whether the residence nil-rate band applies

An accountant or tax adviser with probate experience can prepare the IHT400, handle correspondence with HMRC, and ensure the tax position is reported correctly. This is one area where professional help often pays for itself by avoiding delays and errors.