Thousands of grieving families across the UK could be entitled to substantial inheritance tax refunds following a decline in property prices between the time of a relative’s death and the subsequent sale of their home. Recent figures from HM Revenue & Customs (HMRC), obtained by financial adviser NFU Mutual through a Freedom of Information request, reveal that more than 10,000 families successfully claimed inheritance tax relief on properties sold at a loss in the 2025-26 tax year.
This represents a significant increase from the 5,070 successful claims made in 2024-25. For some bereaved households, these refunds can be worth tens of thousands of pounds. To illustrate, if a property was valued at £1 million upon death, the estate might face an inheritance tax liability of £400,000 (calculated at the 40% rate). However, if the property is later sold for £900,000, the £100,000 reduction in value can translate into a £40,000 inheritance tax refund.
It is important to note that such refunds are not issued automatically. Executors must actively submit a claim to HMRC using the appropriate form (IHT38). This surge in claims coincides with a weakening property market, particularly in London. Official Land Registry data shows a 3.7% drop in London house prices in the 12 months leading up to May 2026, with the average property valued at approximately £545,000.
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Inheritance tax is normally calculated based on the value of assets at the date of death. However, if the estate subsequently sells a property for less than its recorded value at death, relief on the financial loss may be claimed. Generally, the property must be sold within four years of the date of death for the claim to be valid.
The data also underscores regional disparities, with London and the South East accounting for almost half (£3.26 billion, or 46%) of the £7.03 billion total inheritance tax collected across the UK in 2023-24, reflecting their higher property values.
Sean McCann, a chartered financial planner at NFU Mutual, commented: “A large inheritance tax bill can be a nasty shock for grieving families. These figures show that more people are recognising the possibility of reclaiming overpaid inheritance tax. While falling property prices in London have contributed to this trend, in many cases the increase in claims is due to properties being overvalued at the time of death or deterioration occurring between death and sale.”
Additionally, similar rules apply to certain shares and qualifying investments sold at a loss, although the timeframe to make a claim is shorter. Qualifying investments typically must be sold within 12 months of death, and claims are made using form IHT35. Executors should include all qualifying investments sold during this period in their calculations-not just those that have decreased in value, as any gains on other investments can reduce the total refundable amount.
HMRC data shows that successful claims relating to shares fell from 2,030 in 2023-24 to 1,010 in 2024-25, before rising slightly to 1,150 in 2025-26. Mr McCann further advised: “As more families become subject to inheritance tax, it is essential to understand that overpaid tax can be reclaimed. In volatile markets, reviewing whether a claim is due could make a significant financial difference.”