The number of estates successfully reclaiming Inheritance Tax (IHT) following losses on property sales has more than doubled in a year, highlighting an important relief that executors and families may easily overlook.
Figures obtained by NFU Mutual through a Freedom of Information request to HMRC show that successful claims relating to losses on property sales increased from 5,070 in the 2024/25 tax year to 10,550 in 2025/26. For executors dealing with an estate, the figures are a useful reminder that the value of a property at the date of death is not necessarily the amount it will eventually sell for.
David Bayliss, a Wills & Probate Paralegal at NBB Waldrons, works within our Wills and Probate team. Before joining the firm, David worked extensively in financial services and later-life advice, including estate planning, pensions, protection, care and equity release. He now advises clients on Wills, Trusts and Lasting Powers of Attorney.
For families administering an estate, David says the important point is not simply that refunds are increasing, but that executors should consider whether the tax position has changed as the estate has been administered.
David adds: “Administering an estate can take time and circumstances do not stand still. If a property ultimately sells for less than the value used for Inheritance Tax purposes, executors should not assume that the original tax bill is necessarily the end of the matter. There are circumstances where relief can be claimed, but the rules, evidence and time limits need to be considered carefully before a claim is made. I address some of these points here”.
Why are more estates reclaiming Inheritance Tax?
Inheritance Tax is generally calculated by reference to the value of a person’s estate at the date of their death.
Property can form a significant proportion of that estate and its value may therefore have a substantial bearing on the amount of IHT payable.
The difficulty is that months, and sometimes considerably longer, can pass between a person’s death, obtaining probate and completing the administration and sale of estate assets.
Property markets can change during that period. The UK House Price Index published by HM Land Registry showed that the average UK property was valued at approximately £271,000 in May 2026, representing annual growth of 2.7%. However, the national figure masks considerable regional and property-type variation.
For example, average London prices were 3.7% lower than a year earlier, while flats and maisonettes across the UK were down 1.3%. Even in regions where average prices increased annually, individual properties can sell for considerably less than their date-of-death valuation. That can matter for IHT.
Can you reclaim Inheritance Tax if a house sells for less than its probate value?
Potentially, yes. HMRC provides a specific loss-on-sale relief for land and buildings where qualifying property forming part of a deceased person’s estate is subsequently sold for less than its value at the date of death.
According to HMRC’s guidance on form IHT38, the sale will normally need to take place within four years of the date of death.
Where the conditions are satisfied, the sale value can effectively replace the higher date-of-death value for IHT purposes, potentially reducing the estate’s IHT liability and generating a repayment.
However, this is not automatic and selling a property below its original valuation does not by itself guarantee an IHT refund.
How might an IHT property refund work?
Consider a simplified example. A property is valued at £750,000 at the date of death and that value is included when calculating the estate’s Inheritance Tax liability.
The executors later sell it to an unconnected buyer for £700,000.
There is therefore a £50,000 difference between the value at death and the eventual sale price.
Subject to the conditions for loss-on-sale relief being satisfied, the lower figure may be substituted when the estate’s IHT position is recalculated.
That does not necessarily mean the estate will receive 40% of the £50,000 difference.
The actual repayment depends upon the estate as a whole, including the available nil-rate bands, exemptions and reliefs, the amount of IHT originally paid and other qualifying property transactions.
This is why the figures need to be considered in the context of the entire estate rather than looking at the property’s sale price in isolation.
When can property loss relief be claimed?
HMRC’s rules contain a number of conditions.
Broadly, the person liable for the tax, often the executors or administrators, may be able to make a claim where a qualifying interest in land or buildings included in the estate is sold within four years following the death.
HMRC’s current IHT38 form and guidance also make clear that relief cannot normally be claimed where the difference between the value at death and sale price is less than £1,000 or 5% of the value at death, whichever is lower.
There are additional rules covering matters such as sales to beneficiaries or their relatives, purchases of replacement land and changes to the property between death and sale.
That makes it important to look beyond the headline figures before submitting a claim.
Why executors should consider all property sales
One particularly important feature of the relief is that executors cannot necessarily select only the property that has fallen in value.
HMRC’s guidance explains that when relief is claimed, other relevant interests in land sold by the claimant within the qualifying period may also have to be brought into the calculation.
Suppose, for example, an estate contains two properties. One sells substantially below its date-of-death value but another sells above it. The second transaction may affect the relief available on the first.
HMRC also warns that a loss-on-sale claim can sometimes leave an estate in a worse position and, once made, the claim cannot simply be withdrawn because the outcome is unfavourable.
Executors should therefore calculate the likely effect of a claim before submitting form IHT38.
What if shares or investments fall in value?
There is a separate IHT relief for certain investments.
HMRC’s IHT35 guidance allows a claim in respect of qualifying investments sold at a loss within 12 months of the date of death.
Qualifying investments can include listed shares and securities and holdings in authorised unit trusts.
Again, there is an important complication: all qualifying investments sold by the appropriate person during the relevant period must generally be included in the calculation, not simply the investments that fell in value.
The rules for investments and property are different, so executors should not assume that the same deadlines or calculations apply.
What if the original Inheritance Tax account was wrong?
A fall in property or investment values is not the only reason an estate might ultimately have paid too much IHT.
An original Inheritance Tax account may need to be amended where, for example, incorrect information was supplied or something material was omitted.
That might involve an asset or liability being recorded incorrectly, relevant information becoming available during the administration or an applicable exemption or relief not having been properly reflected.
HMRC’s guidance states that where someone who has delivered an account discovers that it was materially incorrect because information was wrong or omitted, a corrective account should generally be delivered within six months of discovering the error.
Different rules and time limits therefore apply depending upon why the estate’s tax position needs to change.
How long do you have to reclaim overpaid Inheritance Tax?
This is an area where executors should be particularly careful because there is no single deadline covering every type of IHT repayment.
For property loss relief, the qualifying sale will generally need to take place within four years of the date of death.
For qualifying investments, the sale period is normally 12 months from death.
HMRC also states that, more generally, a repayment may be refused where the request is made more than four years after the payment, or last payment, of the tax or interest, subject to exceptions.
Executors should therefore seek advice promptly rather than waiting until the estate administration is nearing completion.
What evidence should executors keep?
Good record-keeping can make a significant difference if HMRC asks questions about a claim.
Depending upon the circumstances, executors should retain documents such as:
- the original date-of-death or probate valuation
- professional valuation reports
- estate agent particulars and marketing information
- the contract and completion statement
- information concerning the property’s condition
- records of other estate properties sold
- details of relevant investments
- the original IHT calculation and account
- subsequent HMRC correspondence.
HMRC may look at whether a property was genuinely sold at arm’s length and whether the sale price represents the best consideration that could reasonably have been obtained.
Changes to the property between the death and eventual sale can also affect the calculation.
Can an IHT refund claim be refused?
Yes. An application is not automatically accepted simply because a property sold for less than the figure originally reported.
HMRC may query the valuation, sale, parties involved or calculation and may request further information.
A request for evidence does not necessarily mean that the claim has been rejected. It may be possible to resolve HMRC’s questions by supplying further valuation evidence, completion documents or an explanation of the calculation.
More complex estates can require particular care, including those involving several properties, jointly owned assets, trusts, agricultural or business property, overseas assets or disputed valuations.
A useful reminder for executors
The sharp increase in successful claims is a timely reminder to executors that estate administration does not end with calculating and paying the initial Inheritance Tax bill.
Values change. Assets are sold. Further information comes to light.
An estate’s tax position should therefore be kept under review throughout the administration.
If a property has sold below the value used for IHT purposes, shares or qualifying investments have fallen in value or new information suggests the original IHT calculation may have been incorrect, it is worth establishing whether a repayment could be due.
For more information about probate, see our guide to when probate is required or visit our Probate and Estate Administration service page.
How NBB Waldrons can help
Our Wills and Probate team can assist executors and administrators with probate, estate administration and Inheritance Tax matters, including reviewing an estate where there may have been an overpayment of IHT.
Where appropriate, this can include considering property and investment values, relevant reliefs and exemptions, HMRC forms and supporting evidence and correspondence with HMRC.
NBB Waldrons supports individuals and families across the West Midlands and Worcestershire, including through our offices in Dudley, Merry Hill, Kingswinford, Birmingham, Walsall and Worcester, as well as Cheltenham and London.
If you are an executor or administrator and believe an estate may have paid too much Inheritance Tax, contact our Wills and Probate team. Reviewing the position early can help identify whether relief may be available and, importantly, whether any relevant deadlines are approaching.
This article is for general information only and does not constitute legal or tax advice. The availability and value of any Inheritance Tax relief will depend on the circumstances of the individual estate.
