Excepted Estates — When You Don’t Need a Full IHT Return

When a loved one dies in England and Wales, families often fear a lengthy tax return before probate can begin. For most estates we handle at Curtis Legal, a full inheritance tax account is not required. Since the Inheritance Tax (Delivery of Accounts) (Excepted Estates) (Amendment) Regulations 2021 came into force on 1 January 2022, the vast majority of straightforward estates now qualify as “excepted” and skip the IHT400 process entirely.

That reform folded the old IHT205 information into the online probate application itself, so executors move from death certificate to grant faster and at lower cost. But the rules are not a free pass: miscategorise and HMRC can still demand a full return months later, with penalties attached.

This guide explains the three categories of excepted estate, what you still disclose on the probate application, when a full IHT400 remains unavoidable, and where recent 2025/26 tightening is catching families out. As always, we quote a fixed fee before we start.

What the 2022 reform actually changed

Before 2022, executors of most non-taxpaying estates had to file IHT205, a short-form paper return sent to the probate registry. The 2021 Regulations abolished that requirement for deaths on or after 1 January 2022 and folded the questions into the online probate application. The executor answers the value questions, signs the legal statement, and the registry passes the data to HMRC automatically.

The reform also raised the qualifying thresholds. Chargeable lifetime gifts up to £250,000 are now tolerated (previously £150,000), and the exempt-estate ceiling rose to £3 million gross value. For roughly nine in ten estates we handle in Monmouthshire, no separate tax form ever reaches HMRC.

Category one: low-value excepted estates

The first and most common category is the low-value estate. To qualify, the gross value of the estate for probate purposes must not exceed the deceased’s available nil-rate band. The standard nil-rate band is £325,000 in 2026, and this can be increased by any unused transferable band inherited from a predeceased spouse, provided the claim is straightforward and does not require an IHT400.

Alongside the headline threshold, the estate must satisfy several conditions:

• Chargeable lifetime gifts made in the seven years before death must not exceed £250,000 in total.
• The deceased must have been domiciled in the United Kingdom at the date of death.
• Trust interests must be limited (broadly, a single trust with settled property under £250,000, and only if that trust income was paid directly to the deceased).
• Foreign assets must not exceed £100,000 in total value.
• The estate must not include any specified transfers such as gifts with reservation of benefit or alternatively secured pension arrangements.

If the estate meets each of these tests, no separate account goes to HMRC and probate can be applied for through the online portal.

Category two: exempt excepted estates

The second category applies where the whole net estate passes to exempt beneficiaries. In practice this almost always means the surviving spouse or civil partner, a UK-registered charity, or a combination of the two. Because these gifts attract 100% inheritance tax relief, the estate carries no tax liability regardless of its size — up to a generous ceiling.

To qualify as an exempt excepted estate, the gross value must not exceed £3 million and the net chargeable value after spouse and charity exemptions must be under the nil-rate band. The same conditions on lifetime gifts, foreign assets, and trust interests apply as with the low-value category. This is the route we most often use for widowed clients whose entire estate passes to their children only on the second death, or for philanthropically minded testators whose residuary estate goes to registered charities.

Category three: foreign domicile with limited UK assets

The third category is narrower and applies where the deceased was not domiciled in the United Kingdom but held UK assets requiring a grant of representation. Provided the value of those UK assets does not exceed £150,000 and consists only of cash or quoted shares, the estate qualifies as excepted. Anything more complex — UK land, private company shares, or higher-value portfolios — pushes the executors back into full IHT400 territory.

We see this category mostly with clients who have retired abroad but retained a UK bank account or a modest share portfolio held with a British broker.

What you still report on the online application

Being excepted does not mean silent. The online probate application asks the executor to confirm the gross and net values of the estate, whether any lifetime gifts were made in the seven years before death, and which excepted category the estate falls into. You must also declare whether you are claiming any transferable nil-rate band from a predeceased spouse.

These figures need to be accurate. HMRC receives the data automatically and can open an enquiry within four years of the grant if the return looks understated. We recently advised a family whose parent had gifted £180,000 to a grandchild eight years before death — outside the seven-year window, but declared in error, triggering an HMRC query that took months to resolve.

Detailed guidance on valuing the estate is set out at gov.uk/valuing-estate-of-someone-who-died-for-inheritance-tax. If in doubt, we always recommend a professional valuation of property and any significant personal chattels before the probate application is submitted.

When you still need a full IHT400

The excepted-estate route is generous but not universal. Executors must submit a full IHT400 in a number of situations:

• Transferable nil-rate band claims that are not straightforward. A clean 100% transfer from a predeceased spouse can be claimed on the excepted route, but partial transfers or those involving lifetime gifts from the first-to-die usually require IHT400 with form IHT402.
• Residence nil-rate band claims. The £175,000 residence nil-rate band cannot be claimed on the excepted route. If the estate is under the combined £500,000 threshold only because of the RNRB, a full IHT400 with IHT435 is required.
• Business or agricultural relief. Any claim for business property relief or agricultural property relief requires a full account, even where the ultimate tax liability is nil.
• Gifts above the small-amounts thresholds. Chargeable lifetime gifts totalling more than £250,000 in the seven years before death, or gifts with reservation of benefit at any value, push the estate out of the excepted category.
• Trust interests. Multiple settled interests, or a single trust exceeding £250,000, trigger IHT400.
• Taper threshold estates. Any estate approaching the £2 million taper threshold, where the RNRB begins to withdraw at £1 for every £2 above, needs a full return to demonstrate the exact taper calculation.

For families expecting to owe tax at the 40% rate above the combined nil-rate bands, the IHT400 route is unavoidable. In those cases we work backwards from the twelve-month payment deadline, arranging the direct payment scheme where possible so beneficiaries do not need to bridge-finance the tax from personal funds.

Recent tightening for 2025/26 practice

Since April 2025, HMRC has taken a noticeably firmer line on estates that claim excepted status but include property gifted with a reserved benefit — for example, a parent who transferred the family home to their children but continued to live there rent-free. The gift-with-reservation rules mean the property remains in the estate for inheritance tax purposes, and any such arrangement now automatically requires IHT400 regardless of value.

We are also seeing more challenges to informal loan arrangements between family members. If a parent lent a child £100,000 during their lifetime and the debt was still outstanding at death, that loan sits in the estate as an asset. If the paperwork is missing, HMRC now presumes the sum was a gift rather than a loan, which can tip an otherwise excepted estate into the taxable bracket. Good record-keeping during the lifetime of the deceased is the best defence.

Executors should also note the probate application fee is £526 from 13 July 2026, payable regardless of whether the estate is excepted or requires a full IHT400. That fee is a fixed cost that catches families by surprise and should be budgeted from estate funds at the outset.

How Curtis Legal helps executors get the categorisation right

Getting the categorisation right at the outset saves months of delay and, in some cases, thousands of pounds in avoidable penalties. Our probate team reviews the papers before the application is drafted, calculates the gross and net values with the beneficiaries, checks the seven-year gift history against bank records, and confirms whether any transferable or residence nil-rate band is available. Where a full IHT400 is needed, we prepare it in-house rather than referring clients out to a separate tax specialist.

We work on transparent fixed fees, agreed after we have seen the deceased’s papers and know the actual complexity of the estate. Most excepted estates complete within four to six months from instruction; taxable estates typically run to nine or twelve months while HMRC clears the account. If you are unsure whether your late relative’s estate qualifies as excepted, we will tell you at the first meeting and quote accordingly. More detail on our approach to estate administration is available on our probate hub.

If you are administering an estate and need clarity on whether the excepted-estate route applies, we offer a same-day callback on 0800 214 216 or via tel:0800214216. Our probate team at Curtis Legal Limited will review the papers, confirm the category, and quote a fixed fee before you commit. You can also explore our sibling guides on executor duties, intestacy, and contested wills, and see the full inheritance tax cluster or return to the probate services hub.