Quick Succession Relief: how to reduce Inheritance Tax on two deaths

If you inherit money from a relative and die a few years later, your estate could face Inheritance Tax on wealth that was already taxed when you inherited it.

Fortunately, there’s a relief designed to reduce the impact of Inheritance Tax being charged twice within a short period. It’s called Quick Succession Relief (QSR), and it could save your beneficiaries thousands of pounds.

What is Quick Succession Relief?

Quick Succession Relief reduces Inheritance Tax when someone dies within five years of an earlier inheritance or other transfer on which Inheritance Tax was payable.

It’s also known as successive charges relief.

Normally, Inheritance Tax is paid from someone’s estate before their beneficiaries receive their inheritance. If one of those beneficiaries dies shortly afterwards, the money they inherited may form part of their own estate and be subject to Inheritance Tax again.

QSR reduces the second tax bill to take account of the tax charged on the earlier inheritance.

However, it doesn’t necessarily remove the second Inheritance Tax bill altogether. The amount saved depends on how much was inherited, the earlier tax charge and the time between the two deaths.

You can read the underlying rules in HMRC’s Quick Succession Relief guidance.

When does Quick Succession Relief apply?

There are three main conditions:

1. Inheritance Tax was payable on the earlier transfer. This will commonly be an inheritance received following someone’s death.
2. The person who received the inheritance died within five years. The period is measured from the earlier transfer, normally the first person’s date of death, rather than the date the inheritance was actually received.
3. Inheritance Tax is payable on the second person’s estate. There’s no relief to claim if their estate doesn’t owe any Inheritance Tax.

Importantly, you don’t have to still own the assets you inherited. QSR can apply even if you’ve spent the money or given it away.

The relief can also apply to certain taxable lifetime gifts and transfers involving trusts. However, the rules for these are more complicated, so we’ll concentrate on inheritances following a death.

How much Quick Succession Relief can you claim?

The amount of relief depends partly on the time between the earlier transfer and the second person’s death.

HMRC uses the following percentages:

For example, if someone dies 18 months after inheriting money, the applicable percentage is 80%.

Crucially, that doesn’t mean their Inheritance Tax bill is reduced by 80%. The percentage applies to the relevant share of the tax charged on the earlier transfer.

Let’s look at how that works.

Quick Succession Relief calculation: a worked example

Margaret dies leaving an estate worth £1 million, consisting entirely of savings and investments. She leaves everything equally to her two adult children, Lucy and Daniel.

For simplicity, we’ll assume there are no debts, previous taxable gifts or additional exemptions and reliefs. The standard £325,000 Inheritance Tax allowance applies.

Step 1: Calculate the tax on Margaret’s estate

Margaret’s estate is worth £1 million. After deducting her £325,000 tax-free allowance, £675,000 is subject to Inheritance Tax at 40%.

Inheritance Tax: £675,000 × 40% = £270,000

This tax is paid from Margaret’s estate, leaving £730,000 to be divided equally between her children.

Lucy and Daniel therefore each inherit £365,000.

Step 2: Calculate the tax on Lucy’s estate

Sadly, Lucy dies 18 months after her mother.

She’s unmarried and leaves an estate consisting of her £365,000 inheritance plus £435,000 of her own savings and investments.

Her total estate is therefore £800,000.

Assuming her full £325,000 tax-free allowance is available, with no other relevant exemptions or reliefs, the Inheritance Tax calculation is:

(£800,000 – £325,000) × 40% = £190,000

Without Quick Succession Relief, Lucy’s estate would face an Inheritance Tax bill of £190,000.

Step 3: Calculate the Quick Succession Relief

HMRC uses a formula that takes account of the inheritance received, the tax charged on the earlier estate and the time between the deaths.

In Lucy’s case, we need four figures:

• £365,000 – the amount Lucy actually inherited, after her share of the earlier Inheritance Tax was deducted.
• £1,000,000 – the total value of Margaret’s estate before Inheritance Tax.
• £270,000 – the Inheritance Tax charged on Margaret’s estate.
• 80% – the relief percentage because Lucy died 18 months after her mother.

The calculation is:

(£365,000 ÷ £1,000,000) × £270,000 × 80% = £78,840

Why divide £365,000 by £1 million? Because Lucy inherited only part of Margaret’s estate, and the relief must reflect the amount she actually received after tax.

The resulting £78,840 is deducted from the Inheritance Tax payable on Lucy’s estate.

Step 4: Work out the final Inheritance Tax bill

Quick Succession Relief saves Lucy’s beneficiaries £78,840 in Inheritance Tax.

This is a simplified example. Actual calculations may involve additional allowances, gifts or other circumstances that affect the relief. You can find HMRC’s official formula in its guidance on calculating QSR.

When isn’t Quick Succession Relief available?

QSR won’t normally be available in the following circumstances:

• The earlier inheritance was exempt from Inheritance Tax. For example, assets inherited from a spouse or civil partner are normally exempt, so there’s no earlier tax charge on which to base the relief.
• The earlier estate paid no Inheritance Tax. If its value fell within the available tax-free allowances, QSR won’t apply.
• The second estate owes no Inheritance Tax. There’s no liability for QSR to reduce.
• More than five years have passed. Once the five-year period expires, no relief is available.

The distinction between married and unmarried couples is particularly relevant here. Unmarried partners don’t normally benefit from the Inheritance Tax spouse exemption, as we explain in our article on Inheritance Tax for unmarried couples.

How do you claim Quick Succession Relief?

If you’re dealing with someone’s estate and they received an inheritance during the previous five years, it’s worth checking whether QSR applies.

You’ll need details of the earlier inheritance, including:

• Who left the inheritance and when they died.
• The value of their estate and the Inheritance Tax charged.
• How much the person whose estate you’re dealing with actually inherited.

Where you’re completing an IHT400 Inheritance Tax account, QSR is claimed through boxes 10 to 17 of the accompanying IHT400 Calculation form. You’ll also need to provide details of the earlier estate.

The calculation can become complicated where the inheritance was shared between several beneficiaries or involved particular types of gifts or trusts.

If you’re unsure whether QSR applies, it’s worth seeking advice before finalising the Inheritance Tax return.

Need help with Inheritance Tax?

Quick Succession Relief can make a substantial difference when someone dies shortly after receiving a taxable inheritance. However, it’s important to establish whether the relief applies and calculate the amount correctly.

At THP, we can help you assess your Inheritance Tax position, identify available reliefs and calculate the tax due. We can also work alongside your solicitor when dealing with an estate.

Find out more about our Inheritance Tax planning services or contact us to discuss your circumstances.