What Is a Deed of Variation? Redirecting an Inheritance Within 2 Years, With a Worked IHT Example
A deed of variation lets a beneficiary give up or redirect some or all of an inheritance they're due to receive — and, if it's worded correctly, the law treats the new gift as though the person who died had written it that way. To get that tax treatment you must complete the variation in writing within two years of the death, every beneficiary made worse off must agree, and the document must contain the right statutory statements. Used well, it can move money down a generation and avoid a second Inheritance Tax (IHT) charge later.
What a deed of variation actually does
When someone dies, the people named in the will (or, with no will, the people entitled under the intestacy rules) inherit. A deed of variation — also called a "variation", a "deed of family arrangement", or an "instrument of variation" — is a document signed by a beneficiary saying: "I don't want my share to go to me; I want it to go to someone else instead."
Normally, if you received an inheritance and then gave it away, that would be a gift from you. You'd potentially face the seven-year rule, and your own estate could be taxed if you died within that window. A deed of variation sidesteps that. Provided it meets the statutory conditions, the variation is "read back" to the date of death: for IHT purposes it's as if the deceased's will had left the asset directly to the new recipient. The gift is never treated as coming from the original beneficiary at all.
This relief comes from section 142 of the Inheritance Tax Act 1984, with a parallel rule for Capital Gains Tax (CGT) in section 62(6) of the Taxation of Chargeable Gains Act 1992. GOV.UK's plain-English version of the rules is at gov.uk: How to change a will after a death.
The strict conditions — get any one wrong and it fails
The "read-back" treatment is not automatic. The variation only qualifies if all of these are met:
| Condition | What it means in practice |
|---|---|
| In writing | It must be a written document. GOV.UK confirms you don't need a formal "deed" — a signed letter can work — but a properly drafted deed is far safer and is the norm where land or larger sums are involved. |
| Within 2 years of death | "Any changes to the will must be completed within 2 years of the death" (gov.uk). Miss the deadline and you cannot use a variation — any redirection is then just an ordinary lifetime gift from you. |
| Everyone worse off agrees | Every beneficiary whose entitlement is reduced by the change must sign. You cannot vary away someone else's inheritance without their consent. |
| The right tax statements | To get IHT read-back, the document must state that section 142(1) IHTA 1984 is intended to apply. For CGT read-back, it must also state that section 62(6) TCGA 1992 is intended to apply. HMRC's form IOV2 checklist exists to confirm a variation meets the Acts' requirements. |
| No "consideration" | The relief fails if anyone is paid (in money or money's worth, from outside the estate) to agree to the variation. It must be a genuine redirection, not a sale. |
| Notify HMRC if more IHT is due | If the variation increases the IHT bill, you must send a copy to HMRC within 6 months of making it (gov.uk). |
The signed document does not have to be sent to HMRC in every case — only where it changes the tax due. Keep it with the estate papers regardless; the executors and the new recipient may need it years later.
Worked example: skipping a generation to dodge a second IHT charge
This is the classic, and most valuable, use of a variation: a beneficiary who already has enough redirects an inheritance straight to their own children, so the money never lands in — and is never taxed again in — their own estate.
Worked Example — Margaret, David and the grandchildren
The death: Margaret dies in May 2026. Her will leaves her entire £600,000 estate to her only son, David (age 58). Her estate uses her £325,000 nil-rate band, so IHT is charged at 40% on the £275,000 above it.
| Margaret's estate | Amount |
|---|---|
| Estate value | £600,000 |
| Less nil-rate band (NRB) | −£325,000 |
| Taxable | £275,000 |
| IHT at 40% | £110,000 |
| Net to David | £490,000 |
(Margaret had no qualifying home passing to descendants, so the £175,000 residence nil-rate band doesn't apply here — she'd downsized to a rented flat.)
The problem: David is comfortable. He owns his home, his own estate is already worth around £900,000, and he expects it to grow. Whatever he inherits from Margaret will simply sit on top of his estate — and be taxed at 40% again when he dies. On the £490,000 he'd receive, that's a future IHT cost of up to £196,000 the second time around.
The variation: Within two years of Margaret's death, David signs a deed of variation redirecting £100,000 of his inheritance equally to his two children (Margaret's grandchildren). The deed states that section 142(1) IHTA 1984 is intended to apply.
The result:
- For IHT, it's read back as if Margaret had left £100,000 to the grandchildren and £500,000 to David. Margaret's total estate and IHT bill are unchanged (£110,000) — the variation just changes who receives what, not the size of her estate.
- The £100,000 is treated as coming from Margaret, not from David. It never enters David's estate, so it can never be taxed on his death.
- David has effectively removed £100,000 from a future 40% charge. That's up to £40,000 of IHT his children avoid later — without the seven-year survival risk a normal gift from David would carry.
Why a plain gift wouldn't have worked as well: if David had simply inherited and then given £100,000 to his children, that gift would only fully escape his estate if he survived seven years. The variation removes that uncertainty entirely: the money is treated as never having been his.
The same mechanism is used to redirect a gift to charity (which can lower the estate's IHT rate to 36% if the charitable gift reaches 10% of the net estate), to equalise an unfair will between siblings, or to fix a will that accidentally created an IHT problem.
When you do NOT need a deed of variation
A variation is a tool, not a reflex. Plenty of estates don't need one:
- The will already does what you want. If Margaret had simply left £100,000 to the grandchildren in her will, there'd be nothing to vary. Always read the will first.
- Small or non-taxable estates. If the whole estate is comfortably within the available nil-rate bands and no second-charge problem exists, redirecting money rarely saves tax — though a variation can still be used purely to share things out more fairly.
- You're happy to use a normal gift. If the recipient is in good health, expects to live well beyond seven years, and there's no urgency, an ordinary lifetime gift can achieve a similar IHT outcome without any deed.
- You'd be paid to sign. If money is changing hands to secure agreement, the read-back relief is lost — so the deed's main advantage evaporates.
Who can refuse — and why you can't undo it
Any beneficiary who is being asked to give up part of their entitlement can refuse to sign. Nobody can be forced to vary their inheritance, and an adult of sound mind cannot be made to give away what the will leaves them. If a beneficiary made worse off won't agree, the variation can't include their share.
Special care is needed where a beneficiary is a child or lacks mental capacity: someone can't simply sign away a minor's or protected person's inheritance, and court approval may be required — this is a point to take to a solicitor or STEP practitioner, not to handle on a kitchen table.
Crucially, a variation cannot be undone. Once you've validly redirected your inheritance, that asset is gone — it now belongs to the new recipient. You can only vary the same gift once. So the decision needs to be made with clear eyes: model the figures, take advice if the sums are meaningful, and be certain before anyone signs.
The headline UK figures (verified)
| Figure | 2026/27 amount | Source |
|---|---|---|
| Nil-rate band (NRB) | £325,000 (frozen to 5 Apr 2031) | gov.uk |
| Residence nil-rate band (RNRB) | £175,000 (frozen to 5 Apr 2030) | gov.uk |
| RNRB taper threshold | £2,000,000 | gov.uk |
| Standard IHT rate | 40% | gov.uk |
| Reduced rate (10%+ to charity) | 36% | gov.uk |
| Time limit for a variation | 2 years from death | gov.uk |
Get the free Deed of Variation checklist
A one-page checklist of every condition a variation must meet — so nothing gets missed before anyone signs.
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Frequently asked questions
Can I do a deed of variation more than two years after the death?
No. To get the IHT "read-back" treatment, the variation must be completed within two years of the death (gov.uk). After that, you can still give the money away, but it counts as an ordinary lifetime gift from you — with the seven-year rule and no read-back.
Does a deed of variation change the deceased's Inheritance Tax bill?
Usually no. It changes who receives an asset, not the size of the estate, so the deceased's IHT generally stays the same. It only changes the bill where, for example, redirecting a gift to charity brings the estate to the 36% reduced rate, or where a redirection moves assets in or out of a spouse exemption. If a variation increases the IHT due, you must send a copy to HMRC within six months.
Do I have to send the deed to HMRC?
Only if the variation results in more Inheritance Tax being payable — then a copy must reach HMRC within six months of the variation. In other cases you keep the signed deed with the estate records. HMRC's IOV2 checklist helps confirm the document meets the legal requirements.
Can someone be forced to sign a deed of variation?
No. A beneficiary who would lose out can refuse, and an adult of sound mind cannot be compelled to give up their inheritance. Where a child or a person lacking mental capacity would be affected, you generally can't sign on their behalf without court approval — take advice before proceeding.
Can a deed of variation be reversed?
No. Once a valid variation is signed, the redirected asset belongs to the new recipient and the change cannot be undone. You can only vary the same gift once, so be certain before signing.
What's the difference between a deed of variation and a disclaimer?
A disclaimer means you reject a gift entirely — you can't choose where it goes; it falls back into the estate to be distributed under the will or intestacy rules. A deed of variation lets you specify exactly who receives the redirected inheritance instead. The variation is far more flexible, which is why it's the usual route for generation-skipping.
Probate basics
Who applies, when probate is needed, and the timeline from death to distribution.
The nil-rate bands
How the £325,000 NRB and £175,000 residence band stack — and when they're tapered away.
General information, not personal United Kingdom tax/legal advice. Verify with a qualified professional.
Sources: GOV.UK — How to change a will after a death; Inheritance Tax; Residence nil rate band; Instrument of variation checklist (IOV2). Statutory basis: s.142 Inheritance Tax Act 1984; s.62(6) Taxation of Chargeable Gains Act 1992. Figures verified 2026-06-03.