Figures released by HMRC to NFU Mutual in a freedom of information request showed there were 6,262 reclaims made in 2020, an increase of 763 from reclaims made in 2019.
Inheritance tax is assessed on the date of death, and the tax must normally be paid within six months. If the price of property or shares has fallen when the executors come to sell, they can reclaim the overpaid tax.
The tax relief is not automatic and therefore has to be proactively reclaimed.
Sean McCann, Chartered Financial Planner at NFU Mutual, said: “These figures show more people are becoming aware they can reclaim overpaid inheritance tax.
“If house prices start to fall in 2021, it’s important families who have recently paid an inheritance tax bill are aware of this ability to reclaim, which could save them thousands of pounds.
"Even small percentage falls in property prices can lead to significant amounts of tax being reclaimed. Inheritance tax is charged at 40% so if a property were to fall in value by £10,000 this could mean up to £4,000 could be reclaimed."
There were 4,419 reclaims made on loss of property value, despite the buoyant property market in 2020. The tax relief can be claimed for a fall in the property value within four years of death.
There were 1,843 reclaims for shares sold at a lower value. Inheritance tax can be reclaimed on qualifying shares and investments sold at a lower value in the twelve months after death. All qualifying shares and investments are aggregated so if other investments have risen in value this will reduce the amount of inheritance tax that can be reclaimed.