The Deed of Variation: A Simple Way to Save Tax After Someone Dies

Losing a loved one is never easy, and dealing with legal and financial matters afterwards can feel overwhelming. Most people assume that once a will is in place, nothing can be changed.

But that’s not always true.

In the UK, there’s a little-known option that can allow families to adjust an inheritance after death and in some cases, save a significant amount of tax. It’s called a Deed of Variation.

What Is a Deed of Variation?

A Deed of Variation allows a beneficiary to redirect some or all of their inheritance to someone else.

The key benefit? If it’s done properly and within the time limit, HMRC treats the change as if it was written into the will originally.

That means you can:

• Reduce Inheritance Tax (IHT)
• Avoid unnecessary future tax bills
• Pass wealth more efficiently within the family

Why Would You Use One?

As we know at RLK every family situation is different, but here are some of the most common reasons people use Deeds of Variation in the UK:

💍 Supporting a Surviving Spouse

Sometimes a will leaves assets directly to children, even though a spouse is still alive.

By redirecting part of the inheritance to the surviving spouse, families can:

• Make use of the spouse exemption (no IHT)
• Reduce the immediate tax bill

👨‍👩‍👧 Passing Wealth to the Next Generation

If children are already financially secure, they may prefer to pass wealth directly to their own children.

This can:

• Prevent the inheritance being taxed twice
• Keep more wealth within the family long term

❤️ Leaving Something to Charity

If at least 10% of an estate goes to charity, the IHT rate drops from 40% to 36%.

A Deed of Variation can help families:

• Support a cause they care about
• Reduce the overall tax paid

🏡 Making the Most of Property Tax Reliefs

Tax rules around the family home can be complicated.

A variation can sometimes help ensure the estate qualifies for additional allowances, potentially saving tens of thousands of pounds in tax.

A Real-Life Style Example

Let’s say Archie deceased, divorced and passing away in a care home aged 94 leaves:

• An estate is worth £1,000,000
• Entirely to two children

Without any planning:

• Around £270,000 could go to Inheritance Tax

But if the children choose to redirect £100,000 to charity:

• The tax rate drops to 36%
• The tax bill falls significantly, £207,000 payable instead
• The charity benefits too to the tune of £100,000 exempt from IHT

It’s a simple change but it can make a big difference.

Is There a Time Limit?

Yes and it’s strict.

A Deed of Variation must be completed within two years of the date of death.

It doesn’t matter:

• When probate is granted
• When assets are received
• When advice is taken

After two years, the opportunity is lost.

Are There Any Rules?

To be effective for tax purposes, the variation must:

• Be in writing (usually as a formal deed)
• Be made within two years
• Be done voluntarily (no payment or benefit in return)
• Be signed by the person giving up the inheritance
• Include the correct tax wording

This is why professional advice is so important, instructing RLK avoids errors that can mean losing the tax benefit.

Does It Change the Will?

Not exactly.

The original will stays the same but for tax purposes, it’s treated as if the deceased had made the change themselves.

Can It Help With Future Tax Too?

Yes.

A Deed of Variation isn’t just about saving tax now it can also:

• Reduce the size of someone’s future estate
• Avoid unnecessary tax when wealth passes down again
• Help protect assets for children or grandchildren

Example: Using a Deed of Variation to Save Future Inheritance Tax (Full Spousal Allowances)

An estate of £1,000,000 is being administered. Under the Will, Child A is due to inherit £500,000.

Child A is already financially secure, holding approximately £1.2 million of assets jointly with their spouse, including a qualifying main residence.

Child A does not require the inheritance and, within two years of death, executes a Deed of Variation to redirect the £500,000 equally to their three children.

It is assumed that:

• Child A survives their spouse and inherits their estate
• Full transferable allowances are available
• £200,000 is spent during retirement

Available allowances on second death

As Child A inherits from their spouse, the estate benefits from:

• Nil Rate Band (NRB): £325,000 × 2 = £650,000
• Residence Nil Rate Band (RNRB): £175,000 × 2 = £350,000

Total available allowances: £1,000,000

Position if no planning is undertaken

Child A receives the £500,000 inheritance.

Estate calculation:

• Initial combined wealth: £1,200,000
• Plus inheritance: £500,000 → £1,700,000
• Less retirement spending: £200,000 → Estate on death: £1,500,000

IHT calculation:

• Estate: £1,500,000
• Less allowances: £1,000,000
• Taxable estate: £500,000
• IHT at 40%: £200,000

Position if the Deed of Variation is used

The £500,000 is redirected and never enters Child A’s estate.

Estate calculation:

• Initial combined wealth: £1,200,000
• Less retirement spending: £200,000 → Estate on death: £1,000,000

IHT calculation:

• Estate: £1,000,000
• Less allowances: £1,000,000
• Taxable estate: £0
• IHT: £0

Tax saving achieved

By redirecting the inheritance:

• £500,000 is removed from a taxable estate
• The estate is reduced to within the combined NRB and RNRB

Inheritance Tax saved: £200,000

Is It Right for Everyone?

Not always.

It depends on:

• The size of the estate
• Who the beneficiaries are
• Family circumstances
• Tax exposure

But where it is appropriate, it can be one of the most effective planning tools available after death.

A Quick Word of Caution

Deeds of Variation are powerful but they must be handled carefully.

Common pitfalls include:

• Missing the two-year deadline
• Incorrect wording
• Informal agreements that don’t count legally

Getting it wrong can mean no tax saving at all.

Final Thoughts

A Deed of Variation gives families something rare: flexibility after death.

It allows you to:

• Adapt to changing circumstances
• Make better financial decisions
• Ensure more of your loved one’s estate goes where it’s really needed

At a difficult time, that flexibility can be incredibly valuable.

If you would like advice on protecting your assets and planning ahead, our estate planning solicitors can help.

To arrange an appointment, make an enquiry or request a call back, please contact us.