Deed of Variation for Inheritance Tax UK 2026: How It Works, IHT Savings, Time Limits, and When HMRC Treats It as a Gift
A deed of variation lets beneficiaries rewrite a will (or intestacy) for IHT within 2 years of death — and HMRC treats it as if the deceased had originally made the gift. The 36% charitable rate, NRB trusts, and skip-generation planning are all achievable post-death — but only within the 2yr window.
2-Year Deadline — Absolute and Cannot Be Extended
The deed of variation must be executed within exactly 2 years of the date of death (s142 IHTA 1984). No court, no HMRC, and no amount of professional advice can extend this deadline after it has passed. The IHT planning opportunity is permanently lost once 2yr expires.
| Use Case | How It Works | IHT Calculation | Conditions | Key Benefit |
|---|---|---|---|---|
| Redirect to charity — trigger the 36% reduced IHT rate (s36 IHTA) | Beneficiaries who inherited from the estate redirect ≥10% of the 'baseline' estate to qualifying UK charities via DoV. The charity redirect is treated as if the deceased had left it to charity. The s36 IHTA 36% reduced rate then applies to the rest of the chargeable estate. | Estate £2m widowed; tNRB+NRB = £650k. Baseline = £2m − £650k = £1.35m. 10% = £135k charity (redirected via DoV from the children's inheritance). Remaining: £1.35m − £135k = £1.215m × 36% = £437,400 IHT. vs 40% rate: £1.35m × 40% = £540,000. Saving: £102,600. Net cost: £135k charity − £102.6k saving = £32,400 to the family. For £32.4k 'cost', the family redirects £135k to charity and saves £102.6k IHT. | Written DoV within 2yr of death. All beneficiaries giving up their share must sign. The DoV must state that s142 IHTA and s36 IHTA apply. HMRC notification within 6 months of DoV. The charity must be a qualifying UK charity (or registered with HMRC as a charitable body). A formula clause in the DoV (rather than a fixed amount) ensures exactly 10% of the actual baseline is always charitable — essential if the estate value is uncertain. | The 36% rate is permanently lost without a charitable legacy. A DoV within 2yr is the ONLY way to access the 36% rate if the will (or intestacy) did not include a charitable legacy. It is one of the highest-return uses of a DoV. |
| Create an NRB Discretionary Trust post-death | If the will left everything to the surviving spouse (or there was no will — intestacy), the entire estate passes to the spouse with no NRB used on first death. A DoV can redirect up to NRB (£325k) from the spouse into a Discretionary Trust — treated as if the will had included an NRB DT. This keeps £325k outside the surviving spouse's estate (saving up to £130k IHT on second death). | First death: estate £1m; will left all to spouse. Second death (no DoV): spouse's estate = £1m. With tNRB+NRB = £650k, and property to children (RNRB+tRNRB = £350k): chargeable = £1m − £650k − £350k = £0 IHT (in this case, thresholds cover it). But for larger estates: first death estate £2m, all to spouse. Second death estate = £2m. tNRB+NRB = £650k; RNRB+tRNRB = £350k. Chargeable: £2m − £650k − £350k = £1m × 40% = £400k IHT. With NRB DT via DoV at first death (£325k redirected into DT, rest to spouse): second death estate = £1.675m. Chargeable: £1.675m − £650k − £350k = £675k × 40% = £270k IHT. Saving: £130k (the NRB DT assets — £325k — passed outside the surviving spouse's estate). | Written DoV within 2yr of first death. Spouse must consent and sign (they are giving up £325k of inheritance). Trust must be properly drafted by a solicitor. The NRB DT trustees and beneficiaries must be specified. HMRC notification if the DoV reduces the IHT on the first death estate. NOTE: the NRB DT via DoV is most effective on first death. On second death, the surviving spouse's OWN estate is assessed — the DoV NRB DT assets are NOT in the second spouse's estate. | The NRB DT cannot be created after the 2yr window. The £130k saving (£325k × 40%) is a permanent, irreversible benefit. Very high value — particularly for estates between £650k and £2m where the NRB DT genuinely reduces the second death IHT. |
| Spousal redirect — move inheritance to surviving spouse for s18 IHTA exemption | If the estate was NOT left to the spouse (e.g., it was left to children, or partially to children under intestacy with a large statutory legacy plus children's shares), the children can redirect their inheritance to the surviving spouse via DoV — treated as if the deceased had left it to the spouse. The spousal exemption (s18 IHTA) then applies: no IHT on the redirected amount. | Single person dies intestate leaving £800k estate (no spouse — children only). Children inherit £800k. IHT: £800k − £325k NRB − £175k RNRB (if property) = £300k × 40% = £120k. BETTER (if spouse still living or there are other beneficiaries): if there IS a spouse and the children want to redirect to the spouse via DoV: IHT-free via s18 IHTA. Children's £339k (from the earlier example) redirected to spouse: £339k × 40% IHT = £135.6k saved. | Written DoV within 2yr. Affected beneficiaries must consent. Spousal exemption applies: unlimited for UK domiciled spouse; capped at £325k for non-domiciled spouse (or s267ZA IHTA election). NOTE: the surviving spouse now has more assets in their estate — their own eventual IHT may be higher. The DoV simply defers the IHT to the second death — useful if the surviving spouse is much younger or if the estate is expected to grow slower than IHT thresholds. | Particularly useful when the deceased died intestate and children received a taxable share — the children can redirect to the spouse (IHT-free now) and then plan for the second death. |
| Skip-a-generation redirect — from children to grandchildren | Adult children who inherit redirect all or part of their inheritance directly to their own children (the deceased's grandchildren) via DoV. Treated as if the deceased had left it to the grandchildren. This 'skips a generation' of IHT — the children do not pay IHT (the estate IHT is assessed on the original estate); when the grandchildren eventually inherit, the assets are in their estates (not the children's). | Children inherit £500k from grandparent's estate. IHT on grandparent's estate: already paid. If children keep the £500k: when children die, £500k is in their estates — further IHT at 40% (up to £200k additional IHT). If children redirect via DoV to grandchildren: £500k passes directly to grandchildren from the deceased grandparent's estate; not taxed in the children's estates. Saving on the children's deaths: potentially £200k IHT (£500k × 40%). The 'skip' saves one generation of IHT. | Written DoV within 2yr of grandparent's death. All affected beneficiaries (the children, who are giving up their inheritance) must consent and sign. The grandchildren receive the assets (if minors: held in trust). This is permanent — the children cannot later reclaim the assets. NOTE: if grandchildren are minors, the assets may be held under a statutory trust for them. | One of the most powerful long-term IHT strategies available post-death. Particularly effective when the inheriting children are wealthy themselves and do not need the inheritance — they can redirect to the next generation, removing the assets from their own potential IHT estates without using their own NRB or triggering any PET clock. |
| Redirect from intestacy to cohabiting partner | The deceased's beneficiaries under intestacy (e.g., parents or siblings) redirect all or part of their inheritance to the deceased's cohabiting partner via DoV — treated as if the deceased had left it directly to the partner. | Estate £400k passes to deceased's parents under intestacy (no spouse, no children, no will). DoV: parents redirect entire £400k to the deceased's 20yr cohabiting partner. Result: partner receives £400k. IHT: already paid on the estate; the DoV does not create a new IHT event. HOWEVER: the partner does NOT get the spousal exemption — they are not a spouse. The DoV simply enables the physical transfer to reach the partner. The IHT was assessed before the DoV. | Parents must all consent and sign. The DoV redirects to the partner as if from the deceased's estate. No new IHT event on the redirect itself (s142 deems it to be from the deceased). Important: this does NOT give the partner a spousal IHT exemption — the IHT was assessed on the original estate. It does mean the partner physically receives the assets. | Ensures the cohabiting partner receives the estate when intestacy excluded them. The 2yr window is the only opportunity — it expires regardless of ongoing relationship or financial need. |
| Correct a defective will — fix clerical errors or omissions | A DoV can be used to redirect assets where the will had drafting errors, omissions, or where circumstances have changed since the will was drafted (e.g., a beneficiary in the will has predeceased; a charity has changed name; a legacy was miscalculated). | Will left £100k to 'Cancer Research UK' but the charity had changed its name to 'Cancer Research UK & CRUK Trust'. The executor uses a DoV (with HMRC's cooperation) to confirm the charitable intent and ensure the 36% rate applies. | Written DoV within 2yr of death. All beneficiaries who are affected must consent. If the variation REDUCES what any beneficiary receives, they must sign. NOTE: a DoV cannot be used to correct professional negligence in will drafting — the executors or beneficiaries may have a negligence claim against the solicitors who drafted the defective will, separate from any DoV. | Inexpensive rescue for ambiguous, outdated, or erroneous will provisions. Much cheaper than a court application to rectify a will (Administration of Justice Act 1982 s20 — 6 month deadline from grant of probate). |
Deed of Variation (DoV) IHT UK 2026. s142 IHTA 1984: instrument of variation; 2yr deadline from date of death; in writing; signed by all beneficiaries giving up entitlement; must state s142 IHTA applies; HMRC notified within 6 months if less IHT results (s142(2) IHTA); for CGT s62(6) TCGA 1992 — within 12 months. s142 deems the variation to be made by the DECEASED — not a gift by the beneficiary; no PET; no 7yr clock for the varying beneficiary. If conditions NOT met: variation is a gift by beneficiary — PET (7yr clock) or CLT (if to DT: IHT at 20% on excess above NRB). Conditions for s142 treatment: (1) within 2yr of death; (2) in writing; (3) signed by all beneficiaries giving up; (4) gratuitous — no consideration received; (5) s142 IHTA statement included. Consideration received → no s142; instead a sale or exchange. 36% charitable rate: s36 IHTA — ≥10% of baseline to qualifying charity; DoV can create the charitable legacy even if will had none; baseline = net estate after deducting NRB/tNRB. NRB Discretionary Trust via DoV: treated as if in will; assets outside surviving spouse's estate; s144 IHTA — DT appointments within 2yr read back into will (but note: the DT from DoV is created at the DoV date, not at death — the 2yr s144 window runs from the date of the DoV). Spousal redirect: s18 IHTA spousal exemption applies to the varied amount — IHT-free for UK dom spouse. Skip-generation: children redirect to grandchildren; assets removed from children's estates without using children's NRB or PET clock. Fix intestacy: DoV from intestacy works exactly as DoV from will for IHT purposes. Minors: Variation of Trusts Act 1958 — court approval needed to benefit/vary minors' interests. DoV vs deed of appointment: a DoV varies who inherits from the estate; a deed of appointment by trustees varies how trust assets are distributed. Both can save IHT but in different contexts. HMRC notification address: HMRC Trusts and Estates, BX9 1HT. IHT reference: include the deceased's IHT reference on the notification.
Deed of Variation and IHT: The Complete Guide
What a deed of variation does — and what it cannot do
A Deed of Variation (s142 IHTA 1984) works by treating the variation as if the deceased had originally made the gift — the deceased, not the beneficiary who redirects, is treated as the donor for IHT purposes. This means: the beneficiary does NOT make a gift (no PET, no CLT, no 7yr clock on the beneficiary). The estate is simply reassessed as if the will (or intestacy rules) had originally provided for the varied gift. What a DoV CAN do: redirect any inheritance (whether from a will or from intestacy); redirect to charities, trusts, individuals, or any combination; use after probate has already been obtained; apply to any estate asset. What a DoV CANNOT do: (1) be made AFTER the 2yr deadline — the window is absolute. Once 2yr has passed from the date of death, the IHT position is permanently fixed. (2) Be used by MINOR beneficiaries without court approval (Variation of Trusts Act 1958). (3) Redirect assets that have already been sold by the beneficiary (the beneficiary has to still 'hold' what they inherited — or at least still have the value). (4) Create benefits for the deceased's estate creditors (cannot be used to improve the estate's solvency). (5) Be a conditional variation — a DoV must be unconditional (no 'take-back' clauses). (6) Be agreed informally — must be in writing and signed by all beneficiaries whose interests are adversely affected.
The notification rules — when you must tell HMRC about a deed of variation
The notification requirements for a Deed of Variation have been a source of confusion since HMRC revised its guidance in 2014. The current rules: IF THE DOV REDUCES THE IHT PAYABLE: (a) For IHT: the DoV or a written statement must be sent to HMRC's Inheritance Tax office within 6 months of the date of the DoV. This is a statutory requirement (s142(2) IHTA). Failure to notify does not invalidate the DoV but can result in a late notification penalty. (b) For CGT (if applicable): the DoV or a statement must be sent within 12 months of the date of the DoV (s62(6)(b) TCGA 1992). IF THE DOV DOES NOT REDUCE THE IHT PAYABLE (e.g., a purely personal redirect with no IHT impact): no notification required. The DoV should still contain a statement that the parties intend for s142 IHTA to apply — this is best practice and avoids ambiguity. THE STATEMENTS IN THE DOV: the DoV must contain an express statement that it is intended to take effect under s142 IHTA. For CGT: a separate statement that s62(6) TCGA 1992 applies (if CGT treatment is also required). Without these statements: the DoV may not qualify for the s142 tax treatment and the variation would instead be treated as a gift by the beneficiary (PET with 7yr clock).
When HMRC treats the DoV as a gift by the beneficiary — not by the deceased
Section 142 IHTA 1984 provides very specific conditions for the DoV to be treated as if the deceased had made the gift. If ANY condition is not met: the variation is instead treated as a gift by the BENEFICIARY — which means: (a) if to an individual: a PET with a 7yr clock; (b) if to a discretionary trust: a CLT with IHT at 20% immediately on the excess above NRB. The conditions that, if broken, make the DoV a gift by the beneficiary: (1) EXECUTED OUTSIDE 2yr: a variation made after 2yr from the date of death is NOT s142 compliant — it is a gift by the beneficiary. (2) NOT IN WRITING: informal redistribution by verbal agreement among beneficiaries is a gift by the beneficiary, not a DoV. (3) CONSIDERATION RECEIVED: if the beneficiary who redirects receives any money or money's worth in return for giving up their inheritance, HMRC treats it as a sale (not a gift) — and does NOT give the DoV the s142 treatment. The variation must be gratuitous. (4) BENEFICIARY REDIRECTS TO THEIR OWN ESTATE: if the beneficiary redirects their inheritance to a trust of which they are themselves a beneficiary (so they essentially retain an interest), this may be a gift with reservation (s102 FA 1986) — not a clean DoV. Practical check: if any party is receiving consideration, if the deadline has passed, or if the beneficiary retains a benefit: DO NOT proceed as a DoV — take specialist legal advice.
Frequently Asked Questions
What is a deed of variation and how does it reduce inheritance tax?
A deed of variation (DoV — s142 IHTA 1984) is a post-death document signed by the beneficiaries of an estate to redirect their inheritance. For IHT purposes: HMRC treats the variation as if the deceased had originally made the gift to the new recipient — not as a gift by the beneficiary. Key uses: (1) Redirect to charity to trigger the 36% reduced IHT rate (s36 IHTA — ≥10% of baseline to charity). (2) Create an NRB Discretionary Trust post-death (up to £325k into trust, treated as if in the will). (3) Redirect to the surviving spouse for the unlimited spousal exemption (s18 IHTA). (4) Skip a generation — redirect from children to grandchildren, removing the assets from the children's estates. Requirements: (1) Written document, signed by all beneficiaries giving up their share. (2) Must be made within 2 years of the date of death — absolute deadline. (3) Must state that s142 IHTA applies. (4) HMRC notification within 6 months if the DoV reduces IHT.
How long do you have to make a deed of variation?
2 years from the date of death — this is an absolute statutory deadline (s142(1) IHTA 1984). The 2yr deadline cannot be extended by court order, HMRC discretion, or any other mechanism. Once 2yr has passed: the IHT position is permanently fixed and a DoV is no longer possible. Starting the clock: the 2yr period runs from the date of death (not from the date of grant of probate or date of estate distribution). Practical implication: even if the estate has not been distributed after 2yr, the DoV opportunity is gone. Executors and beneficiaries should review the IHT position and DoV opportunities EARLY in the estate administration process — not after the estate has been distributed.
Does a deed of variation count as a gift — does the 7-year rule apply?
A DoV that complies with s142 IHTA 1984 does NOT count as a gift by the beneficiary. HMRC treats the variation as if the DECEASED had made the gift. The beneficiary who redirects their inheritance does NOT start a 7yr PET clock. The variation is simply a rewriting of the deceased's will (or intestacy) for IHT purposes. WHEN THE 7-YEAR RULE DOES APPLY: if the DoV does NOT comply with s142 (e.g., executed after 2yr; no written document; beneficiary received consideration; no s142 statement), the variation is treated as a gift by the BENEFICIARY — with the 7yr PET clock and potential IHT if the beneficiary dies within 7yr. The DoV must be executed correctly to get the s142 treatment. Always use a solicitor for a DoV with significant IHT implications.
Can you use a deed of variation to fix intestacy?
Yes — a deed of variation (s142 IHTA 1984) can be used to redirect assets inherited under intestacy, just as it can redirect assets inherited under a will. The variation is treated as if the DECEASED had originally left the estate to the varied beneficiaries. Common uses of DoV after intestacy: (1) Redirect to a cohabiting partner who received nothing under intestacy. (2) Redirect to charity to trigger the 36% reduced rate (impossible under intestacy with no charitable legacy in a will). (3) Create an NRB Discretionary Trust that the intestacy could not create. (4) Redirect from the children's statutory share to the surviving spouse (if IHT-efficient). All affected beneficiaries must consent and sign. If children are under 18: Variation of Trusts Act 1958 court approval needed — expensive and uncertain. The 2yr deadline applies from the date of death regardless of whether the estate was left under a will or intestacy.
Do you need to tell HMRC about a deed of variation?
If the DoV results in LESS IHT being payable: HMRC must be notified within 6 months of executing the DoV (s142(2) IHTA). For CGT: within 12 months (s62(6)(b) TCGA 1992). If the DoV does NOT reduce IHT (e.g., a purely personal redirect with no IHT impact): no HMRC notification required — but the DoV should still state that s142 IHTA applies. Best practice: always include the s142 IHTA statement in the DoV document, and the s62(6) TCGA statement if CGT treatment is also required. Send a copy of the DoV to HMRC's Inheritance Tax office (HMRC Trusts and Estates, HMRC, BX9 1HT) with the original IHT reference number. Keep a copy of the DoV and HMRC acknowledgement with the estate papers.
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