Most families dealing with a death assume that if there’s no Inheritance Tax to pay, there’s nothing much to file. For estates worth roughly £325,000 to £1 million, that assumption has been broadly true since the excepted estate rules changed in January 2022 — many non-taxpaying estates can get probate without a full Inheritance Tax account, known as an IHT400. But HMRC has just told agents, in Agent Update issue 146, that this shortcut is being misused far more often than anyone realised. And the people most exposed are executors doing probate themselves, without an accountant or solicitor checking the figures first.
What HMRC has actually said
HMRC’s Borderline Excepted Estates project is sending an educational “One to Many” letter to agents who filed excepted-estate applications at or around £325,000, £500,000, £650,000, £825,000 and £1 million. HMRC has been clear that this is preventative, not an investigation — it’s a nudge to check the workings before something goes wrong later, not an accusation that anything already has.
The reason those particular figures matter is that they cluster suspiciously close to the thresholds that decide whether an estate qualifies as “excepted” at all. If an estate looks like it’s been squeezed just under the line, HMRC wants agents — and executors — to be certain the sums were done properly, rather than optimistically.
The mistake HMRC keeps seeing
The core misunderstanding is this: when working out whether an estate is excepted, you should not take the residence nil-rate band into account, and you should not take a brought-forward or transferable allowance into account either. Those are entirely separate from the basic nil-rate band of £325,000.
Here’s why that trips people up. A widow or widower might have a full transferable nil-rate band from a late spouse, plus their own residence nil-rate band, and between them a couple’s reliefs can reach £1 million. An executor doing the maths themselves can look at an estate worth, say, £700,000, see that the total allowances available comfortably cover it, and conclude there’s nothing to pay and nothing to file. But the excepted-estate test at the point of applying for probate is not about what allowances might eventually apply — it’s about the basic thresholds, and whether the transferable and residence allowances still need to be formally claimed.
The downsizing allowance and the transferable nil-rate band do not apply automatically. They have to be claimed, on an IHT400. If an estate has genuinely relied on those allowances to bring the tax bill to nil, an IHT400 is very likely still required — even though, once it’s filed correctly, no tax may be due at the end of it.
Why this hits the £600,000-£900,000 estate hardest
This is exactly the band where families are most likely to try probate themselves, because the estate isn’t large enough to feel like it needs specialist help, and it isn’t small enough to be straightforward. A house worth £450,000, some savings, a share portfolio from a late parent — add it up and you’re in excepted-estate territory quickly, especially once a transferable allowance from an earlier death is added in.
The trouble is that lay executors — a son, a daughter, a surviving spouse — are relying on gov.uk guidance and probate forms, not on someone trained to spot when a claim needs to be made formally rather than assumed. If they file as an excepted estate when an IHT400 was actually required, HMRC’s own guidance is blunt about the consequences: incorrect calculations, claims made out of time, and unexpected tax and penalties surfacing later — sometimes well after probate has already been granted and the estate distributed.
That last point is the sting. Money can already be spent, a house already sold and the proceeds shared out among beneficiaries, before anyone realises a filing should have happened differently. Unwinding that is far harder than getting it right first time.
What’s changed with the IHT reference number process
Alongside the excepted-estates warning, HMRC has also changed how executors apply for an Inheritance Tax reference number. The application (form IHT422) is now expected to be made online, and applicants need to give an email address as part of that process. Paper applications are still accepted where needed, but the online route is now the default, and it’s worth knowing that before you sit down to start the paperwork — an email address you check regularly will save a delay later.
The deadlines that catch people out
Two dates matter more than most executors realise. An IHT400, where one is needed, has to be filed within 12 months of the date of death. But interest on any tax due starts running much earlier — from six months after the end of the month of death. So an estate can be well within the 12-month filing deadline and still be quietly accruing interest, simply because the money wasn’t paid within that first six-month window.
For an estate that turns out to owe nothing once the correct claims are made, this is largely academic. But for an estate where the excepted-estate test was applied wrongly and tax genuinely was due, those months of interest add up before anyone has even spotted the problem.
What a family should check before deciding “there’s nothing to file”
Before an executor assumes an excepted estate application is the right route, it’s worth working through a short checklist:
- Is the basic nil-rate band of £325,000 being used correctly on its own, without folding in the residence nil-rate band or a transferable allowance to see if it “still comes in under”?
- Is any part of the tax-free position relying on a transferable nil-rate band from a late spouse, or a downsizing allowance? If so, that needs a formal claim on an IHT400 — it isn’t automatic.
- Has anyone actually reviewed the values used for the house and any investments, or are they estimates that haven’t been checked against probate valuations?
- Is the total estate close to £325,000, £500,000, £650,000, £825,000 or £1 million — the figures HMRC itself has flagged as worth a second look?
- Does the family understand that interest starts six months after the end of the month of death, regardless of the 12-month filing deadline?
None of this means every mid-sized estate needs a full IHT400, or that excepted-estate probate is somehow unsafe. For plenty of straightforward estates it remains exactly the right, simpler route. The point is narrower and more practical: an estate that leans on a transferable allowance, a downsizing allowance, or sits near one of those threshold figures deserves a proper check before anyone assumes there’s nothing to file.
Why this matters beyond the tax return
Getting probate wrong at this stage doesn’t just risk a penalty. It can mean beneficiaries receive money that later has to be clawed back, or delays while HMRC queries a filing months after everyone thought the estate was settled. A short conversation before the forms go in is far cheaper, in every sense, than untangling it afterwards.
What this means if you’re using a solicitor or accountant
If a solicitor or accountant is handling probate for you, this is largely their job to get right — that’s exactly what you’re paying them for, and nothing here should make you doubt work that’s already been done properly on your behalf. But it’s still worth asking, plainly, whether the estate’s excepted status has been checked against the current rules, particularly if a transferable allowance or downsizing allowance features anywhere in the figures. A good adviser will welcome the question.
Where families run into difficulty is when probate is handled without professional help at all — which is entirely legal and, for plenty of estates, entirely sensible. The gov.uk forms are written for a general audience, and they don’t flag which allowances are automatic and which need a separate claim. That gap is exactly what HMRC’s letter is trying to close, and it’s worth reading the guidance twice rather than once if you’re doing this yourself.
Keeping the right paperwork from day one
Whichever route an estate takes, the same records tend to matter later: probate valuations for the house and any investments, details of any earlier death where a nil-rate band might be transferable, and a note of whether a property is being downsized or sold as part of the estate. None of this needs to be complicated, but it does need to exist somewhere clear, rather than in someone’s memory or a mix of old letters. If HMRC ever asks a question months after probate is granted, having those figures to hand — rather than reconstructing them from scratch — makes the difference between a quick reply and a stressful one.
If you’re acting as an executor on an estate anywhere near these figures, or you simply want to understand what your own estate might look like under these rules, it’s worth talking it through properly rather than guessing. Book a Discovery Call at https://www.thelegacywillscompany.co.uk/discovery-call/ and we’ll go through it with you, plainly and without jargon.