Answers · UK 2025/26
What is a deed of variation, and can it reduce Inheritance Tax on an estate?
A deed of variation lets a beneficiary of a will (or of intestacy) redirect some or all of their inheritance to someone else — commonly to reduce Inheritance Tax, such as redirecting assets to grandchildren or charity — and, provided it is made within two years of death and meets specific conditions, it is treated for tax purposes as if the deceased had left it that way originally.
Full answer
A deed of variation (sometimes called a deed of family arrangement) allows a beneficiary who is due to inherit money or assets from someone's estate — whether under a valid will or under intestacy rules — to legally redirect their inheritance to a different person or organisation, most commonly used for Inheritance Tax planning, but also sometimes used to correct an outdated will, provide for someone the original will overlooked, or make gifts to grandchildren rather than the immediate beneficiary. Provided the deed is executed within two years of the date of death, is made voluntarily without payment in exchange, is signed by all beneficiaries whose original entitlement is being reduced, and includes the correct statutory statement confirming it should apply for Inheritance Tax and Capital Gains Tax purposes, HMRC treats the estate as if the deceased person had left their estate that way in the first place, rather than treating the redirection as a new gift made by the original beneficiary (which would otherwise be a potentially exempt transfer, only becoming fully free of Inheritance Tax if the beneficiary survived a further seven years). This retrospective tax treatment is what makes deeds of variation genuinely useful for Inheritance Tax planning: for example, if an estate leaves everything to a surviving spouse (already fully exempt from Inheritance Tax under the spousal exemption), the spouse could use a deed of variation to redirect a portion of the inheritance directly to their children or grandchildren, using the deceased's own nil-rate band (£325,000) or the deceased's unused portion of it, rather than that money later forming part of the spouse's own estate and being taxed again on the spouse's eventual death. Similarly, redirecting part of an estate to a registered charity via a deed of variation can help an estate reach the 10% threshold needed to qualify for the reduced 36% Inheritance Tax rate (rather than the standard 40% rate) on the remainder of the estate. A deed of variation cannot be used unilaterally by one beneficiary to redirect someone else's inheritance, and cannot increase what was left to a beneficiary who has already died before the deed is made. Professional legal and tax advice is strongly recommended given the strict time limit and formal requirements involved. Use the Inheritance Tax calculator to model the effect of a proposed variation before finalising it.
More answers
This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.