Sell nose-diving investments to reduce inheritance tax (IHT)
7th August 2026
Posted in Articles by Andrew Marr
The issue
It is not uncommon for assets to fall in value between the date of death and their eventual sale. When this happens, in certain circumstance it is possible to replace the (higher) value at the date of death with the (lower) sales value for the purposes of calculating IHT. Although this will mean that there will be no loss for capital gains tax purposes, the removal of a capital loss (which may not be of any use anyway) will be worth swapping for a 40% IHT saving.
Shares sold within 12 months
If the personal representatives sell quoted shares or securities within 12 months of the date of death for less than their probate value, they can elect for the lower sale proceeds to be substituted for the date of death value for IHT purposes. This election only applies to any net losses and so it is not possible to cherry-pick share sales that have lost value while ignoring share sales that have been profitable. If a sale of shares in A Ltd had made a £50,000 loss and a sale of shares in B Ltd had made a £50,000 profit, then no claim would be possible.
Example
Giles died on 1 September 2025 owning £1m worth of shares in St James Place Plc. These shares are currently worth around £890,000. If a year is allowed to drift by without any disposal, then the opportunity for any IHT saving will be lost. However, if these shares are sold before 1 September 2026, then the IHT value of £1m can be changed to £890,000. This would lead to a reduction in the IHT bill of £44,000 and would mean that there would be no loss in the estate for capital gains tax purposes.
Land and buildings
Similar rules apply for land and buildings although here the qualifying period is four years from the date of death rather than 12 months.
Elections
Although the sales have to take place within the deadlines set out above it is possible to make any claims within four years of the end of the deadline for shares and usually three years for land and buildings. Therefore, an election in respect of a share sale can be made up to five years after the date of death.
Forbes Dawson view
This is something that executors should be proactively reviewing. To the extent that an asset has fallen in value and the relevant deadline is coming up then its disposal strategy should be reviewed. The clear reduction in IHT will often be a significant enough incentive to sell. This relief will not apply once assets have been transferred into beneficiary’s personal name which is another reason why everyone should be fully aware of the relief. Conversely, planning may involve transferring profit making assets to beneficiaries for them to sell so as not to affect the loss in respect of which a claim can be made. Executors need to be on their toes when it is clear that asset values in an estate are falling!
Given the generous time limit for making a claim there may be opportunities here to review the position for ‘done and dusted’ estates and reclaim IHT which can then be distributed to beneficiaries after taking account of any capital gains tax adjustments.
