Deeds of Variation UK: Redirect an Inheritance and Save IHT

Updated: 16 May 2026 • Reading time: 8 min

It is not too late to plan once a person has died. A deed of variation— sometimes called a deed of family arrangement — allows beneficiaries to redirect all or part of an inheritance within two years of death, with the redirection treated as if the deceased had made it in their original will. This powerful post-death tool can save significant inheritance tax, correct an outdated will, or redistribute assets to better reflect the family’s needs.

How a Deed of Variation Works

Under section 142 of the Inheritance Tax Act 1984 and section 62(6) of the Taxation of Chargeable Gains Act 1992, a variation made within two years of death is read backinto the will (or intestacy) for tax purposes. The redirected gift is treated as having been made directly from the deceased — not from the beneficiary who redirected it.

This means:

• No IHT on the redirected amount (as a gift from the beneficiary)
• No seven-year clock starting for the redirecting beneficiary
• No CGT disposal by the beneficiary — the asset passes at probate value
• The new recipient can benefit from exemptions (spousal, charitable) that the original beneficiary could not

The Two-Year Rule

The deed must be executed within two years of the date of death. This is an absolute deadline for IHT and CGT read-back purposes. There is no mechanism to extend it. If the two-year window closes, a beneficiary can still redirect their inheritance but it will be treated as a gift from them — potentially subject to CGT and starting the seven-year PET clock for IHT.

The variation does not need to be registered, notified to HMRC, or lodged with any court provided it does not increase the IHT payable. If the variation does increase IHT (for example by redirecting away from a spouse exempt gift), HMRC must be notified within six months of the variation.

Requirements for a Valid Deed

To qualify for the tax read-back, the variation must:

1. Be in writing
2. Be signed by all beneficiaries who are giving up their entitlement
3. Be made within two years of the date of death
4. Contain an explicit election statement that section 142 IHTA 1984 is to apply (for IHT) and/or section 62(6) TCGA 1992 is to apply (for CGT)
5. Not be made for consideration — the beneficiary must receive nothing in return for redirecting the gift

If the variation modifies the will itself (as opposed to simply redirecting a gift), it should be executed as a deed — with the relevant formalities. A solicitor should always draft or review a deed of variation.

Common IHT Planning Uses

1. Redirecting to a Spouse or Civil Partner

If a legacy was left to a child rather than the surviving spouse, redirecting it to the spouse can take advantage of the unlimited spousal exemption, deferring IHT until the second death and potentially increasing the transferable nil-rate band available on the survivor’s death.

2. Redirecting to Charity

Charitable legacies are exempt from IHT. Additionally, if 10% or more of the net estate passes to charity, the IHT rate on the remainder falls from 40% to 36%. A beneficiary can use a variation to redirect part of their inheritance to charity to trigger this reduced rate for other beneficiaries.

3. Skipping a Generation

A beneficiary who does not need the inherited funds may redirect them to their own children or grandchildren. This removes the assets from the beneficiary’s own taxable estate, saving IHT on a second generational transfer — effectively skipping the IHT that would otherwise apply on the beneficiary’s own death.

4. Creating or Funding a Trust

A variation can redirect a legacy into a discretionary or interest-in-possession trust, giving flexibility over who benefits and when. This is useful where the original will did not include a trust structure that would now benefit the family.

5. Correcting an Outdated Will

Where a beneficiary named in the will has already died, or where the distribution no longer reflects the family’s needs, a variation allows the surviving beneficiaries to agree a different split — as if the will had been updated before death.

Pitfalls to Avoid

• Consideration — if the redirecting beneficiary receives anything in return (including a separate payment), the variation fails for tax purposes
• Minors — children under 18 cannot sign a variation; court approval may be needed if a minor’s interests are affected
• Missing the election statement — without the explicit reference to s.142 IHTA 1984 / s.62(6) TCGA 1992, the read-back does not apply
• IHT notification — if the variation increases IHT, HMRC must be notified within six months
• Stamp Duty Land Tax — a variation redirecting residential property may still trigger SDLT if the recipient already owns property

Frequently Asked Questions