The One Form That Could Save Your Family Thousands: Why You Shouldn’t Wait to Complete the IHT403
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only. You should always seek professional advice from an appropriately qualified adviser.
All contents are based on our understanding of current legislation, which is subject to change, any information provided here is only correct at the time of posting.
The Financial Conduct Authority do not regulate will writing, loans, credit cards or some forms of mortgage, tax advice, offshore investments and estate planning.
Inheritance tax planning often focuses on wills, trusts and gifting strategies, yet one of the most influential documents in the entire process receives surprisingly little attention: the IHT403 form. For anyone with a potential IHT liability, this form can be a lifeline for your executors and a key factor in ensuring HMRC receives accurate and complete information about your lifetime gifts.
What many people don’t realise is that although the IHT403 is submitted after death, the best time to complete it is while you’re alive, well and able to provide the detail it requires. Leaving your executors to piece together years of financial history can lead to stress, delays and even unnecessary tax. Preparing the form in advance, and reviewing it regularly, can make a remarkable difference to how smoothly your estate is managed.
This blog explains what the IHT403 includes, why it matters and how working with a financial adviser can help ensure your gifting record is accurate, up to date and properly supported.
What the IHT403 actually is
The IHT403 is HMRC’s schedule for recording lifetime gifts. These gifts can affect the final inheritance tax calculation, particularly those made within seven years before death. HMRC also uses the form to assess whether gifts qualify for exemptions, whether any involved a reservation of benefit and whether some should be treated as normal expenditure out of income.
The form is divided into several key sections.
Gifts made within seven years of death
Executors must declare all significant gifts made in the seven years before death. This includes cash, property, investments, valuable items or any transfer HMRC would consider a gift. Many clients are surprised by what counts as a gift, especially when informal family support or transfers were never seen as “gifting” at the time.
Gifts with a reservation of benefit
This applies when you give away an asset but continue to benefit from it. A common example is giving a property to children but continuing to live there. These gifts can be treated as still belonging to your estate.
Exempt gifts
This includes spouse or civil partner exemptions, gifts to charities, small gifts under £250 and the annual £3,000 exemption. These exemptions need clear recording to avoid confusion later on.
Normal expenditure out of income
This is often the most powerful but misunderstood exemption. Gifts can be entirely exempt if they are made regularly, come from surplus income and do not affect your standard of living. HMRC expects detailed evidence to support this, and executors can only provide that if it has been documented properly during your lifetime.
Chargeable lifetime transfers
This covers gifts into some types of trusts or other arrangements that trigger immediate IHT considerations. These may have been made years ago but must still be included.
Each section requires clarity and often documentation that only you can provide. Without this, executors must rely on guesswork, which can lead to HMRC queries or incorrect tax calculations.
Why completing the IHT403 during your lifetime is so valuable
Although the legal responsibility to submit the IHT403 sits with your executors, completing it while you are alive is one of the greatest acts of support you can offer them.
Your executors won’t know the full story
Even close family members rarely have a complete picture of your financial gifts. They won’t know whether a payment was a gift or a loan, whether it came from income or capital or whether it was intended as part of a pattern of regular support. Asking executors to untangle years of transactions is time‑consuming and emotionally difficult.
HMRC expects evidence
Some exemptions depend entirely on the quality of your records. Normal expenditure gifts, for example, require evidence of your income, your usual expenditure and the pattern of gifting. Without evidence, HMRC may reject the exemption, even if the gifts genuinely qualified.
People forget more than they think
Many clients can’t recall all their gifts from even the last three years, let alone seven. Small or casual transfers often fade from memory, but HMRC may still expect them to be listed. Executors face an even harder challenge when left to reconstruct history.
Updating the form is straightforward
Once the initial information is captured, updating your IHT403 takes little effort. Noting a new gift, adjusting income figures or adding clarification is far easier than leaving executors to decipher old bank statements.
A real-world example that highlights the risks
Joanne, aged 83, passed away and her estate was assessable for IHT. She regularly gifted small monthly amounts to each of her grandchildren from her surplus pension income. These gifts would be genuinely exempt under the normal expenditure rule. However, she never wrote any of it down. When she passed away, her executors classified them as standard potentially exempt transfers. This error would have increased the estate’s IHT bill considerably.
Fortunately, she had been working with a financial adviser who kept annual summaries of her gifting pattern. This allowed HMRC to treat the gifts correctly, avoiding unnecessary tax and speeding up the estate administration process. It is a perfect example of why record‑keeping is essential.
Can executors really complete the IHT403 without you?
In theory, yes. In practice, it is often extremely difficult.
Executors already face a demanding list of responsibilities. Adding the job of recreating gift history, sometimes going back many years and involving multiple banks or accounts is an unfair burden. Mistakes can delay the estate, generate HMRC queries or lead to avoidable tax being paid.
Completing the form during your lifetime removes this uncertainty. It gives executors a clear record to rely on and ensures HMRC has the full picture.
How a financial adviser can help
A financial adviser can support this process by:
• Helping identify which gifts qualify for exemptions
• Recording gifts accurately and consistently
• Reviewing income and expenditure to determine whether gifts meet HMRC’s criteria
• Ensuring your approach to gifting aligns with your wider estate plan
• Updating records annually
• Providing executors with documents they can rely on with confidence
Having a professional involved reduces the risk of errors, provides continuity and ensures that your records stand up to HMRC scrutiny.
Summary
If you have a potential inheritance tax liability, preparing and maintaining your IHT403 now is one of the most practical steps you can take to help your family. It reduces stress for executors, minimises the risk of HMRC enquiries and helps ensure your gifting intentions are fully recognised. Every situation is unique, so it is wise to speak with a financial adviser to review your gifting history and ensure your records are complete, clear and kept up to date.