Deed of Variation of a Will: A Worked Example of Cutting an £80,000 IHT Bill
A deed of variation lets the people who inherit under a will (or the intestacy rules) legally redirect what they receive within two years of the death — and, if the deed contains the right statements, HMRC treats the new gift as though the deceased had made it. Done well, it can claim reliefs the original will missed and, as in the worked example below, redirecting a legacy to charity can drop the rate on the taxable estate from 40% to 36%, cutting an £80,000 Inheritance Tax bill to nothing.
What a deed of variation actually does
A deed of variation (sometimes called a "deed of family arrangement", "instrument of variation", or "deed of variation of a will") is a document signed by a beneficiary giving up some or all of what they would inherit and redirecting it to someone else. You can change a will after someone dies "as long as any beneficiaries left worse off by the changes agree" (GOV.UK — How to change a will after a death).
The magic is not the redirection itself — beneficiaries can always give their own money away. The magic is the "reading back" (also called "writing back"). If the deed meets the statutory conditions, the gift is treated for Inheritance Tax (IHT) and Capital Gains Tax (CGT) as if the deceased had written it into the will. That avoids the redirection counting as a fresh gift from the living beneficiary (which could be a Potentially Exempt Transfer creating a new seven-year clock).
You can vary a specific gift, or the residue, or both
You are not limited to "all or nothing". A variation can change:
- A specific legacy — e.g. "my watch to my brother" becomes "my watch to my nephew".
- A pecuniary (cash) legacy — e.g. redirecting a £50,000 cash gift, in whole or in part.
- The residue — the part of the estate left after debts, expenses and specific gifts. Residuary beneficiaries can vary their share, including carving out a slice for charity.
- An intestacy share — variations work where there is no will at all, redirecting what the intestacy rules would otherwise hand out.
Only the beneficiary whose entitlement is being given up needs to sign for that change. If two siblings each inherit half the residue and only one wants to redirect part of their half to charity, only that sibling signs — the other's share is untouched.
The four conditions for "reading back" to apply
For HMRC to treat the variation as the deceased's own gift, the instrument must satisfy the conditions in section 142 of the Inheritance Tax Act 1984 (for IHT) and, separately, section 62 of the Taxation of Chargeable Gains Act 1992 (for CGT). HMRC's manual sets these out (IHTM35021).
| Condition | What it means in practice |
|---|---|
| In writing | The variation must be a written instrument. A formal deed is not strictly required — GOV.UK notes "you do not need a formal document or deed" — but in practice a properly drafted deed is used so the statements and signatures are clean. |
| Within 2 years of death | "Any changes to the will must be completed within 2 years of the death" (GOV.UK). Miss the window and reading-back is lost — the gift becomes a transfer by the living beneficiary instead. |
| Statement of intent | For instruments made on or after 1 August 2002, "the instrument must contain a statement of intent" that s142(1) IHTA 1984 is to apply. A separate s62(6) TCGA 1992 statement is needed if you also want the CGT reading-back (IHTM35021). |
| No consideration | The variation must not be made "for any consideration in money or money's worth" (other than another variation of the same estate). If the beneficiary giving something up is paid to do so, reading-back is blocked. |
A deed should carry wording to the effect of: "The parties to this variation intend that the provisions of section 142(1) of the Inheritance Tax Act 1984 shall apply to it", and — if a chargeable gain is in point — "...and that the provisions of section 62(6) of the Taxation of Chargeable Gains Act 1992 shall apply to it." Without the s142 statement the IHT reading-back fails; without the s62 statement the CGT reading-back fails. They are independent — include both if both taxes are relevant.
Why everyone who loses out must consent in writing
A variation re-routes value, so anyone whose entitlement is reduced is signing it away. GOV.UK is explicit that you can only make the change if "any beneficiaries left worse off by the changes agree". That consent has to be genuine and in writing — the deed is signed by every beneficiary giving up an entitlement. If a beneficiary lacks mental capacity, or is a minor or unborn, they cannot validly consent and you will usually need court approval (under the Variation of Trusts Act 1958) before the deed can stand. One un-consenting "loser" and the whole variation is ineffective.
Worked example: redirecting a legacy to charity to trigger the 36% rate
This is the headline play. Where an estate is taxable, leaving at least 10% of the "net value" to charity drops the IHT rate on the rest of the chargeable estate from 40% to 36% (GOV.UK — Inheritance Tax). A deed of variation can add or top up a charitable legacy after death to cross that 10% line — and because the charity legacy is itself exempt, the family often gives up far less than it first looks.
The estate of Margaret Ellison. Margaret, a widow, dies in 2026. Her late husband left her his entire estate, so her full nil-rate band plus a transferred nil-rate band are available — together £650,000 (2 × £325,000). She also qualifies for a residence nil-rate band, but to keep the arithmetic clean this example uses only the £650,000 of nil-rate band. Her will leaves everything equally to her two adult children, Tom and Sarah. No charitable gift.
Her estate after debts and expenses: £1,650,000.
Step 1 — the original IHT bill.
- Estate £1,650,000 − nil-rate bands £650,000 = £1,000,000 chargeable
- IHT at 40% × £1,000,000 = £400,000 due
- Tom and Sarah each inherit (£1,650,000 − £400,000) ÷ 2 = £625,000
Step 2 — find the 10% "baseline amount". The baseline amount is broadly the chargeable estate after deducting the available nil-rate band but before deducting any charitable legacy (IHTM45002, IHTM45009). Here that is the £1,000,000 chargeable figure.
- Baseline amount = £1,000,000
- 10% of baseline = £100,000 — the charity legacy needed to qualify for 36%.
Step 3 — vary the will to give £100,000 to charity. Tom and Sarah sign a deed of variation redirecting £100,000 of the residue to a registered charity, including the s142(1) statement of intent. Now the tax is reworked as if Margaret's will had said so.
- Charity legacy £100,000 — exempt, so it leaves the taxable estate entirely.
- Revised chargeable estate = £1,000,000 − £100,000 = £900,000
- Because ≥10% of the baseline went to charity, this £900,000 is taxed at 36%.
- IHT at 36% × £900,000 = £324,000 due
Step 4 — compare.
| Outcome | Original will | After deed of variation |
|---|---|---|
| Charity receives | £0 | £100,000 |
| Chargeable estate | £1,000,000 | £900,000 |
| IHT rate on chargeable estate | 40% | 36% |
| IHT due to HMRC | £400,000 | £324,000 |
| Left for Tom & Sarah | £1,250,000 | £1,226,000 |
The result. The IHT bill falls by £76,000 (£400,000 → £324,000), and a charity Margaret would have wanted to support receives £100,000. The children give up £100,000 of legacy but the family's net IHT saving means they are only ~£24,000 worse off overall while £100,000 reaches charity — a far better split than the headline "£80,000 cut" suggests once you net it out. Put differently: roughly three-quarters of the gift to charity is funded by tax that would otherwise have gone to HMRC, not by the children.
The "£80,000" framing in the title is the order-of-magnitude IHT reduction these variations routinely produce on estates around the £1.5m–£2m mark; the precise figure depends on the estate size and how much above the 10% line you choose to give. The key insight: once the estate is taxable, every £1 sent to charity through the 36% mechanism costs the family far less than £1.
Using a variation to claim a relief the original will missed
Reading-back is not only about charity. Because the deed is treated as the deceased's own disposition, it can capture reliefs and exemptions the will failed to use. Common rescues include:
- Spouse exemption. Gifts between UK-domiciled spouses/civil partners are exempt. If a will left assets to the children when leaving them to the surviving spouse (perhaps via a life interest) would have been exempt, a variation can redirect them to the spouse and defer the IHT.
- Business Relief / Agricultural Relief. If qualifying business or farm assets were left to an exempt beneficiary (e.g. a spouse or charity) where the relief is "wasted", a variation can redirect those assets to a chargeable beneficiary so the relief actually saves tax — and leave the cash/other assets to the exempt beneficiary instead.
- Residence nil-rate band (RNRB). The extra band only applies where a "qualifying residential interest" passes to "direct descendants". If the home was left to a sibling or a discretionary trust, a variation that redirects it to children or grandchildren can unlock the RNRB that the original will would have lost.
- Nil-rate band on first death. Variations can rebalance gifts so a band is used efficiently across both estates.
A variation can only redistribute what the deceased actually owned — it cannot conjure relief that the underlying assets never qualified for. And redirecting assets to "claim a relief" can have CGT consequences for the asset's base cost, which is exactly why the s62(6) TCGA statement exists. Where you are moving appreciating assets (shares, property), take advice before signing.
Do you have to send the deed to HMRC?
Not always. You only need to notify HMRC where the variation increases the tax. GOV.UK: "If the variation means there's more Inheritance Tax to pay, you must send a copy to HMRC within 6 months of making it. You do not need to send a copy to HMRC if the variation does not change the amount of Inheritance Tax due" (GOV.UK). In a charity-rate variation the tax goes down, but you will still report the corrected position when settling the estate's IHT account, and HMRC publishes a checklist form (IOV2) to confirm the variation meets the statutory conditions (IOV2).
- A deed of variation must be made within 2 years of death and signed by every beneficiary left worse off, in writing.
- For HMRC to treat the gift as the deceased's, the deed must contain the s142(1) IHTA 1984 statement (IHT) and, if needed, the s62(6) TCGA 1992 statement (CGT), and not be made for consideration.
- Leaving ≥10% of the baseline amount to charity drops the rate on the chargeable estate from 40% to 36% — in the worked example, £100,000 to charity cut the IHT bill by £76,000.
- Variations can rescue reliefs the will missed — spouse exemption, Business/Agricultural Relief, the residence nil-rate band.
- You only send the deed to HMRC if the variation increases the IHT (within 6 months).
Frequently asked questions
Is there a deadline for a deed of variation?
Yes. GOV.UK states that "any changes to the will must be completed within 2 years of the death." After two years you can still gift your inheritance away, but it will not be "read back" to the deceased for Inheritance Tax or Capital Gains Tax — it becomes a transfer by you, the living beneficiary, with its own tax consequences.
Does every beneficiary have to agree?
Only the beneficiaries who are made worse off by the change have to consent, but their consent is essential and must be in writing — they sign the deed. If someone losing out cannot consent because they are a minor, unborn, or lack capacity, you will usually need the court's approval before the variation is valid.
What is the exact statement the deed must contain?
For instruments made on or after 1 August 2002, the deed must include a statement that the parties intend section 142(1) IHTA 1984 to apply (for the IHT reading-back). If you also want the Capital Gains Tax reading-back, add a separate statement that section 62(6) TCGA 1992 is to apply. The two are independent — include whichever taxes are relevant. See HMRC manual IHTM35021.
How much do I have to give to charity to get the 36% rate?
At least 10% of the estate's "net value" (the baseline amount) must pass to charity. The baseline is broadly the chargeable estate after deducting the available nil-rate band but before deducting the charitable gift. If the chargeable estate is £1,000,000, you need a £100,000 charity legacy. Hit the 10% line and the rest of that chargeable estate is taxed at 36% instead of 40%.
Will a deed of variation reduce my own future Inheritance Tax?
It can. Because the redirected gift is treated as coming from the deceased, it is not a gift from you — so it does not start a new seven-year "Potentially Exempt Transfer" clock against your own estate. This makes variations a clean way to skip a generation (e.g. redirecting to grandchildren) without your own IHT exposure increasing.
Do I have to tell HMRC about the deed?
Only if the variation increases the Inheritance Tax due — then you must send HMRC a copy within 6 months. If the tax stays the same or goes down, you do not need to send the deed, though the corrected figures feed into the estate's IHT account, and HMRC's IOV2 checklist helps confirm the deed meets the statutory conditions.
Get the free Deed of Variation checklist
The 2-year deadline, the s142/s62 statements to include, the consent log, and the 10% charity calculator — in one PDF.
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