How to calculate Quick Succession Relief (QSR) for estate administration

How to calculate QSR

After any reliefs, exemptions and the available nil rate band (£0 - £325,000) have been deducted from the deceased’s death estate, inheritance tax (IHT) is usually charged at 40%. QSR is then applied to reduce the tax liability, and is calculated using the following formula: 

IHT paid previously is the amount of IHT paid on the original transfer; this is then multiplied by the relevant percentage. 

The relevant % depends on the number of years between the date of the transfer to the deceased, and their death: 

• 100% if death was within one year of the original transfer
• 80% within two years
• 60% within three years
• 40% within four years
• 20% within five years

The increase in estate is the amount the deceased’s estate is increased by because of the original transfer. Increase in estate + IHT paid previously is that same figure plus the IHT paid in respect of that transfer. 

Example

You are acting for the deceased who inherited an asset before they died valued at £100,000 in January 2023. IHT at 40% was charged in respect of the asset. This increased the value of the estate from £3,500,000 to £3,600,000.

Should the death of the beneficiary have occurred within a year of the gift, the IHT liability on the estate will be reduced by QSR in the amount of £28,571. 

Tax-free or tax-bearing?

The QSR calculation differs depending on whether the original gift was tax-free or tax-bearing. A tax-free gift is one where the legatee (recipient) did not pay the IHT due on the transfer, i.e., where the tax was paid from the residue of the estate. A tax-bearing gift is one where the legatee was liable for the IHT on transfer, which will in turn reduce the increase in the value of the estate as a result of the transfer. 

In effect, the QSR available would be larger if the original gift was tax-free as opposed to tax-bearing, as there would also be a greater increase in the deceased’s estate.  

The above example is on the basis that the legacy was left ‘tax-free’, which would be the case where the Will does not specify that the tax is to be paid by the beneficiary. The below is an example where the IHT was payable by the beneficiary. 

What if the inherited asset has been disposed of?

There is no requirement for the deceased to still own the asset at the date of death to qualify for QSR. The only requirements are for the original transfer to have been chargeable to IHT, and for the value of the recipient’s estate to have increased as a result of the chargeable transfer.

What should you do? 

It’s likely that the estate you are administrating is more complex than the above examples and there may be other factors to consider when it comes to QSR, so we recommend seeking professional advice if you’re looking to make a QSR claim to ensure the correct tax is paid.

For professional advice on administering an estate, determining whether a QSR claim is possible and how to make the claim, please fill in the form below and one of our experts will be in touch to discuss how we can help.