Deed of Variation Inheritance Tax UK 2026: s142 IHTA, 2-Year Window, Redirecting to Charity, Using the NRB, CGT Election, and Who Must Sign
A deed of variation within 2 years of death is treated as if the DECEASED made the gift — not the beneficiary. No PET. No CLT. You can redirect to charity, create an NRB trust, skip a generation, or fix an IHT-inefficient will. All for free, if done within the window.
2-Year Deadline From the Date of Death — No HMRC Extension
s142 IHTA 1984: the deed of variation must be made within 2 years of the date of death. The clock starts on the date of death — NOT from the grant of probate or from when you become aware. Instruct a solicitor as soon as possible after a death. Missing the 2yr window permanently loses the IHT benefit — there is no HMRC discretion to extend it. Include both s142 IHTA and s62(6) TCGA elections in every deed of variation.
| Use Case | How It Works | Who Must Consent | Planning Guidance |
|---|---|---|---|
| Redirecting the estate to charity — reducing IHT to 36% or eliminating it | If a beneficiary redirects part (or all) of their inheritance to a qualifying charity under a deed of variation (s142 IHTA): the variation is treated as if the DECEASED had made the charitable gift in their will. The charitable exemption (s23 IHTA) applies: the redirected amount is outside the estate for IHT. Two key strategies: (1) outright charitable redirect: beneficiary gives up their entire inheritance to charity — the estate's IHT falls (charity is exempt). (2) The 10% charitable gift threshold (s36 IHTA): if the charitable gift (including the redirected amount after variation) equals or exceeds 10% of the 'baseline amount' — the IHT rate on the rest of the estate falls from 40% to 36%. A beneficiary can use a DoV to push the charitable giving over the 10% threshold — saving 4% IHT on the non-charitable part of the estate. If no charitable gift was made in the will: a DoV to charity can retroactively create one and trigger the 36% rate — the saving on the remaining estate may exceed the amount given to charity. | The charity (new beneficiary) must agree. The original beneficiary must agree (they are giving up their entitlement). The executors must sign to acknowledge the DoV and its IHT implications. HMRC: executors must submit a revised IHT calculation if the variation changes the IHT liability. If additional IHT is due (from a variation that redirects from an exempt beneficiary to a chargeable one): executors notify HMRC within 6 months. IHT reduction from a charitable DoV: the executors may need to reclaim overpaid IHT from HMRC (or amend the IHT400). | Strategy: compare: (a) the amount redirected to charity under the DoV; (b) the IHT saving from the 36% rate applying to the rest of the estate; (c) net cost to the beneficiaries. Example: estate £800k; no charitable gift in will; NRB £325k; IHT at 40% = £190k. If beneficiaries redirect £47.5k (10% of the relevant baseline) to charity via DoV: IHT rate on remaining £752.5k falls to 36% = £153.9k IHT. Total payout (charity + IHT): £47.5k + £153.9k = £201.4k. Without DoV: £190k IHT; beneficiaries keep £610k. With DoV: £201.4k total gone; beneficiaries keep £598.6k — giving £47.5k to charity costs them only £11.4k net from the estate. A DoV can make charitable giving very tax-efficient post-death. |
| Using the deceased's unused nil-rate band — NRB trust via DoV | If the deceased's will did not make full use of the NRB (e.g., everything was left to the surviving spouse — exempt under s18 IHTA), a DoV can redirect assets to a DISCRETIONARY TRUST (NRB trust) up to the value of the deceased's available NRB (£325k in 2026). Under s142 IHTA: the variation is treated as made by the deceased — the discretionary trust is treated as established by the deceased's will. The NRB trust uses the first £325k of the deceased's estate — no IHT on this amount. Assets sit in the trust; the surviving spouse can be a beneficiary (but must not have an absolute entitlement — otherwise it is not a valid discretionary trust). On the surviving spouse's later death: the trust assets are NOT in the surviving spouse's estate (they are held in the NRB trust). The surviving spouse's own NRB (and RNRB if applicable) applies to their own estate. Transferable NRB (tNRB — s8A IHTA): the surviving spouse also has the deceased's unused NRB transferred to them (if the NRB trust route is used: the deceased's NRB is used for the trust, so the tNRB transferred to the surviving spouse may be reduced or eliminated). Important: the DoV-created NRB trust and the tNRB do NOT both fully apply — you cannot use the deceased's NRB twice. Specialist advice is required to compare: (a) NRB trust via DoV (freezes NRB assets at current values in the trust) vs (b) relying on the tNRB on the survivor's death (the tNRB is uplifted to the NRB at the time of the survivor's death — potentially higher than today's NRB if the NRB increases). | The surviving spouse (original beneficiary) must consent — they are giving up part of their inheritance to the discretionary trust. The discretionary trust trustees must agree to act. The executors must acknowledge the DoV. If the spouse is the main beneficiary and also a potential beneficiary of the NRB trust: the trust must be drafted carefully to ensure it is genuinely discretionary (no reservation of benefit; no absolute entitlement). | NRB trust via DoV vs tNRB comparison: NRB trust (via DoV): freezes £325k at current values; assets grow in the trust free of IHT; surviving spouse can benefit (trustees can lend money interest-free to the spouse; the spouse can occupy trust property under a licence); on the spouse's death: trust assets outside the estate. Disadvantage: uses the deceased's NRB (so the tNRB transferred to the survivor is reduced). tNRB (s8A IHTA without DoV): surviving spouse gets the deceased's full unused NRB transferred; on the survivor's death, two NRBs (total £650k) available — plus the RNRB and tRNRB if applicable (potentially £1m combined for a married couple with a home passing to children). Current NRB is frozen until at least April 2028 — the tNRB transferred is the NRB at the time of the SURVIVOR's death. If NRB rises: tNRB is more valuable. The NRB trust via DoV is only superior if: (a) the trust assets are expected to grow significantly (growth is outside the estate); (b) the NRB does NOT rise (so freezing assets at £325k is fine). With the NRB frozen until 2028: specialist advice is essential. |
| Skipping a generation — redirecting from children to grandchildren | If a child inherits from a deceased parent but the child has their own substantial estate: the inheritance will be double-taxed (first on the parent's death; then again on the child's death at 40%). A DoV allows the child to redirect the inheritance DIRECTLY to the grandchild: under s142 IHTA, the redirect is treated as made by the deceased grandparent — no PET by the child. The grandchild takes the inheritance as if it came directly from the deceased grandparent. CGT: if the s62(6) TCGA election is also made: the grandchild acquires the assets at the deceased grandparent's date-of-death market value — no CGT on any post-death gain accrued while the estate was being administered. No PET or CLT is made by the child (the beneficiary varying): the statutory fiction (s142 IHTA) treats the deceased grandparent as having made the gift. The child has NOT made a gift for IHT purposes by varying. | The grandchild (new beneficiary) must consent to receiving the redirected inheritance. The child (original beneficiary) must consent to giving up their entitlement. Both must sign the deed of variation. If the grandchild is a minor: a parent or guardian signs on their behalf (and in England, if a court order or parental responsibility holder cannot sign, a court application may be needed in some cases — specialist advice for minor beneficiaries). | This is one of the most powerful estate planning tools: a wealthy adult child who inherits from a parent can effectively 'skip' their estate and send the assets directly to the grandchildren — with NO IHT, no PET, no CGT — provided the DoV is executed within 2yr of the deceased parent's death, with no consideration, and with all parties consenting. The grandchildren receive the assets as if they had inherited directly. Potentially saves 40% IHT on the full redirected amount when the child dies (assuming the child would have died with those assets in their estate). The child must genuinely waive their entitlement — this is not a planning technique to 'use later'; the DoV must be completed within the 2yr window. |
| Varying intestacy — when there is no will | A deed of variation can also apply to the intestacy rules: if a person dies without a valid will, the estate passes under the intestacy rules (Administration of Estates Act 1925 — England and Wales). The distribution is fixed by law: surviving spouse gets the first £322,000 plus personal chattels; any remainder is split 50/50 between the spouse and children (if any). If the intestacy distribution is tax-inefficient (e.g., children inherit a large sum that could benefit from the NRB but wasn't directed by a will into a trust), a DoV can redirect the intestacy entitlements within 2yr of death. The same s142 IHTA rules apply: the variation is treated as made by the deceased. A person who died without a will can effectively have their estate 'redirected' by the beneficiaries within the 2yr window — as if they had written an optimal will. | All beneficiaries who are affected by the variation must consent. If minor children are intestacy beneficiaries: in England and Wales, a court may need to sanction a variation on behalf of a minor (under the Variation of Trusts Act 1958 or via Chancery proceedings) if the variation is not in the minor's best interests. Specialist solicitor advice is required for variations involving minors under intestacy. | Prevention is better than cure: a will avoids the rigid intestacy rules and provides a platform for the optimal IHT distribution from the outset. However, if the deceased died intestate, or with an out-of-date will: the 2yr DoV window is the mechanism to correct the distribution retroactively. Even if the deceased had a will: a DoV can correct suboptimal distributions (e.g., forgetting to leave a charitable gift for the 36% rate; failing to use the NRB; not skipping a generation). A solicitor specialising in estate administration and IHT planning should be consulted as early as possible after a death — within the first 12 months to allow time to draft and execute the DoV before the 2yr deadline. |
| CGT treatment of a deed of variation — the s62(6) TCGA election | The deed of variation can include a statement electing for s62(6) TCGA 1992 to apply. If the election is included: the variation is treated for CGT as if the DECEASED had made the disposal at death (at the death market value). The new beneficiary ACQUIRES the asset at the DATE OF DEATH market value — not the date of the deed of variation. This means: any increase in asset value BETWEEN the date of death and the date of the DoV is NOT a gain for anyone. Without the s62(6) election: the original beneficiary is treated as having disposed of the asset to the new beneficiary at the date of the DoV — at open market value on that date. If the asset rose in value between death and the DoV date: the original beneficiary has a CGT gain on that increase. The s62(6) election is almost ALWAYS included in a deed of variation — there is rarely a reason NOT to include it (unless the asset fell in value and the original beneficiary wants to crystallise a CGT loss). | The parties to the deed of variation agree to include the s62(6) election in the deed. No HMRC notification is required for the CGT election (unlike the IHT s142 election where HMRC are notified if IHT changes). The election is stated within the deed of variation itself — it does not need to be submitted to HMRC separately. | Always include both the s142 IHTA and s62(6) TCGA elections in a deed of variation unless there is a specific reason not to. The dual election: (a) s142 IHTA — variation is treated as made by the deceased for IHT; (b) s62(6) TCGA — variation is treated as made at death for CGT. Both elections are in the same document. Example: shares worth £200k at death; worth £250k at date of DoV (6 months later); original beneficiary (A) redirects to grandchild (B). Without s62(6): A makes a CGT disposal at £250k (gain of £50k — potentially taxed at 24% capital gains tax = £12k CGT for A). With s62(6): no CGT disposal by A; B acquires at £200k base cost (death value); B pays CGT on future gains above £200k. Always include s62(6) in the deed to avoid an unexpected CGT liability for the varying beneficiary. |
Deed of variation IHT UK 2026. s142 IHTA 1984: s142(1): where a person disposes of his entitlement to a distribution of property of an estate by means of a variation of the distribution (whether or not the administration of the estate has been completed) and the variation is made within the period of two years after the death of the deceased and satisfies the condition in s142(3): the variation shall be treated as if the deceased had made the disposition effecting the varied distribution, and the property included in the estate shall be treated accordingly. s142(3): the condition is that the variation is not made for a consideration in money or money's worth (other than consideration consisting of another variation of the same estate). s142(2): the personal representatives of the deceased may execute the instrument of variation in addition to the person making it but are not required to. HMRC notification: if the variation results in more tax being payable: both the person making the variation and (if required) the personal representatives must give notice to HMRC within 6 months (s142(2A)). IHT implications: the deceased's estate is recalculated as if the variation were in the will; additional IHT may be payable (or a repayment may be due) from the executors. The varied estate is assessed under the standard IHT rules: NRB (£325k), RNRB (£175k if applicable), charitable exemption (s23), spouse exemption (s18), BPR, APR etc. Instruments of variation: in practice, a deed of variation is a formal legal document executed as a deed (witnessed and dated); a written agreement (not a deed) also satisfies s142 but a deed provides better legal evidence and protection. Should include: (a) identification of the estate and the deceased; (b) identification of the original entitlement being varied; (c) identification of the new beneficiary; (d) the s142 IHTA statement (that the variation is made for s142 purposes); (e) the s62(6) TCGA statement (that the variation is made for s62(6) purposes); (f) signatures of all parties. s62(6) TCGA 1992: where a variation of the dispositions taking effect on a person's death is made within the period of two years beginning with the death of that person and the variation is one to which section 62(6) applies and includes a written statement to the effect that s62(6) is to apply: the variation is treated for CGT purposes as if the deceased had made it and as if the legatee had acquired the assets at their market value at the date of death. This prevents CGT arising on post-death appreciation between the date of death and the date of variation. NRB trust via DoV: the DoV redirects assets to a discretionary trust (the NRB trust); the trust is treated as created by the deceased's will; the NRB of £325k (or the available NRB — reduced if prior chargeable transfers) is available to be applied against the trust assets. If the deceased had made prior chargeable transfers: the available NRB is reduced. Transferable NRB (s8A IHTA): s8A(1) — a transferable nil-rate band is available to the surviving spouse on their death; the amount transferred is the proportion of the NRB unused on the first death. If the NRB trust (via DoV) uses the deceased's full NRB: there is no unused NRB to transfer. The tNRB and the NRB trust via DoV are mutually exclusive for the first death's NRB — the executors must compare: (a) freeze £325k in trust (no tNRB for the survivor) vs (b) leave to spouse (100% tNRB available to survivor — combined £650k NRB on second death plus RNRB/tRNRB up to £350k = up to £1m combined). The DoV NRB trust is typically only superior if: the assets in the trust are expected to grow significantly and the growth will be sheltered from IHT. Charitable DoV and 36% rate (s36 IHTA): s36 applies when: (1) the deceased leaves 10% of the 'baseline amount' to charity; (2) the reduced rate of 36% applies to the taxable estate. The baseline amount is calculated differently under s36 depending on the component of the estate (surviving spouse component; general component; settled property component — each assessed separately). Baseline = the component value after NRB but before the charitable deduction. Formula: charitable gift ≥ 10% × (baseline / 0.9) or equivalently ≥ (baseline × 10/90). A DoV to charity that pushes the charitable gifts over this threshold triggers the 36% rate on the relevant component. Consent and consideration: s142(3) — variation must not be for consideration. What counts as consideration: cash payments; release of debts; promises of future benefits. What does NOT count: another variation of the same estate within the 2yr period (s142(3)(b)); the agreement of other beneficiaries to consent without expectation of benefit; natural family dynamics. HMRC Trusts, Settlements and Estates Manual TSEM7000 onwards and Capital Gains Manual CG31000 onwards provide detailed guidance on deeds of variation. Variation of Trusts Act 1958: allows the court to approve a variation of trust terms on behalf of: beneficiaries who lack capacity; minor beneficiaries; unborn beneficiaries. Relevant when minors are affected by the DoV and the variation is not clearly in their interests. Administration of Estates Act 1925 (England): s46 intestacy rules distribution; hierarchy: spouse/CP; children; parents; siblings etc. Intestacy distribution varies in value depending on the personal chattels and statutory legacy amount (now £322,000 in 2024 — adjusted periodically by statutory instrument). Scotland: deed of variation equivalent under Scots law — s142 does not apply in Scotland; instead, Scotland has its own rules including 'prior rights' and 'legal rights' (ius relictae / legitim) that cannot be varied without specific provisions. Wales: same as England — s142 IHTA applies. Northern Ireland: Administration of Estates Act (Northern Ireland) 1955; s142 IHTA applies to NI estates.
Frequently Asked Questions
What is a deed of variation for inheritance tax?
A deed of variation (DoV) is a legal document that allows beneficiaries of a deceased person's estate to redirect their inheritance to a different person, a trust, or a charity. The key IHT feature (s142 IHTA 1984): if the variation is made within 2 years of the death, is in writing, is not for consideration, and all affected parties consent — the variation is treated for IHT purposes as if it were made by the DECEASED (not the beneficiary). This means: (1) no PET or CLT is made by the beneficiary who varies; (2) the redirected gift is treated as part of the deceased's estate — attracting any available IHT reliefs (NRB, charity exemption, etc.); (3) if a beneficiary redirects to charity: the charitable gift reduces the estate's IHT as if the deceased had left it to charity in their will. A DoV is one of the most powerful post-death IHT planning tools — it can correct an IHT-inefficient will, redirect assets to skip a generation, or add a charitable gift retroactively.
How long do you have to do a deed of variation for inheritance tax?
Two years from the date of death — s142(1) IHTA 1984. This is an absolute deadline: if the 2-year window expires, the deed of variation cannot be made with the IHT benefit (s142 treatment). There are no HMRC extensions. The clock runs from the date of death, not from the grant of probate or from when the beneficiary becomes aware of the opportunity. In practice: aim to complete the DoV within 12-18 months to allow time for the solicitor to draft and execute it, gather all consents, and deal with any complications (minor beneficiaries; overseas beneficiaries; complex asset structures). A solicitor should be instructed as soon as possible after a death if a DoV may be beneficial — delays are the most common reason the window is missed.
Can a deed of variation redirect inheritance to a grandchild to skip IHT?
Yes — generation-skipping via a deed of variation is one of the most powerful and commonly used techniques. If an adult child inherits from a parent but already has a large estate: keeping the inheritance will mean it is taxed again at 40% IHT when the child dies. By executing a DoV within 2 years of the parent's death: the child redirects the inheritance to their own children (the deceased grandparent's grandchildren). Under s142 IHTA 1984: the redirect is treated as made by the deceased grandparent — no PET or CLT is made by the child. The grandchildren receive the assets as if they had inherited directly from the grandparent. The assets skip the child's estate entirely. All parties must consent; the deed cannot be for consideration; must be in writing and executed within 2 years of the grandparent's death. Include the s62(6) TCGA election to avoid CGT on post-death value increases.
Who needs to sign a deed of variation?
All parties who are AFFECTED by the variation must sign: (1) the ORIGINAL BENEFICIARY who is giving up their entitlement — they must consent to varying their own inheritance; (2) the NEW BENEFICIARY who is receiving the redirected assets — they must consent to accepting; (3) if a trust is created by the variation: the intended TRUSTEES of the new trust; (4) the EXECUTORS or PERSONAL REPRESENTATIVES of the estate — they must acknowledge the variation and its IHT implications. The HMRC does not need to sign or approve in advance — but if the variation results in additional IHT being payable, the executors must notify HMRC within 6 months. If a beneficiary is a MINOR (under 18): a parent or guardian may sign on their behalf; in some cases, a court application is required if the variation is potentially adverse to the minor's interests (specialist advice essential). A solicitor should draft and execute the DoV — the document must meet the s142 conditions precisely.
Can a deed of variation be made if there is no will (intestacy)?
Yes — a deed of variation can be made even when the deceased died without a valid will (intestate). The intestacy rules (Administration of Estates Act 1925 — England and Wales) determine the distribution automatically. Beneficiaries under the intestacy can redirect their entitlement within 2 years of the death using a DoV — the same s142 IHTA rules apply. The variation is treated as if the deceased had made the redirect in a will. Common use: intestacy gives the surviving spouse everything (if no children) — a variation redirects some to children or grandchildren to use the NRB. Or: children receive under intestacy but redirect to grandchildren. Complications with intestacy and minors: if minor children are beneficiaries under intestacy, a DoV that reduces their entitlement may require court approval (under the Variation of Trusts Act 1958 or Chancery jurisdiction) — specialist solicitor advice is essential. This is the strongest argument for making a valid will: intestacy leaves the estate distribution to the statute, with limited ability to redirect for IHT purposes (and complications for minor beneficiaries).
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