A deed of variation lets the people who inherit under a will or intestacy redirect some or all of what they receive, and if it is made in writing within two years of the death and contains the right statement, inheritance tax and capital gains tax treat the change as if the deceased had made it. The new beneficiary is treated as inheriting directly, so the original beneficiary has not made a gift for IHT and has not made a disposal for CGT.

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What does a deed of variation actually do?

Under general law, when a beneficiary gives away an inheritance they are making their own gift from the date they sign. Section 142 of the Inheritance Tax Act 1984 (IHTA 1984) changes that for inheritance tax. Where, within two years after a death, any of the dispositions of the deceased’s estate (by will, under the intestacy rules or otherwise) are varied by an instrument in writing made by the people who benefit or would benefit, the Act applies as if the variation had been made by the deceased. Section 17(a) then confirms the redirection is not a transfer of value by the original beneficiary.

Section 62(6) of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) does the same for capital gains tax: the variation is not a disposal, and the rules on death apply as if the deceased had made it. HMRC’s checklist IOV2 explains the result: the new beneficiaries are treated as acquiring the assets from the deceased at the date of death and at the value agreed on death.

The deed does not literally rewrite the will. HMRC’s Capital Gains Manual at CG31600 describes it as varying the effects of the will, with retrospective effect for tax only so far as section 62 or section 142 provide.

What conditions must a variation meet?

HMRC’s Inheritance Tax Manual (IHTM35021 onwards) and form IOV2 set out the conditions. The variation must:

  • be in writing and signed within two years of the death. HMRC says at IHTM35024 that every party must have signed within the period, and there is no discretion to extend it. A formal deed is not required; IHTM35022 accepts a letter if it otherwise qualifies;
  • be made by the people whose entitlement is reduced (IHTM35023). IOV2 warns that where minor or unborn beneficiaries lose out, court approval will usually be needed, and a parent’s signature on a child’s behalf is not enough;
  • clearly identify the original disposition being varied and change where the property goes (IHTM35025);
  • contain a statement of intent. For instruments made on or after 1 August 2002, section 142(2) requires a statement by the people making it that they intend section 142(1) to apply. IHTM35028 quotes the IOV2 wording: “The parties to this variation intend that the provisions of section 142(1) Inheritance Tax Act 1984 and section 62(6) Taxation of Chargeable Gains Act 1992 shall apply”;
  • not be made for consideration from outside the estate. Section 142(3) and TCGA 1992 section 62(8) switch off the relief where a beneficiary is paid to give up their entitlement, other than by a reciprocal variation of another part of the same estate.

The statement can cover IHT only, CGT only or both. IOV2 confirms the parties can choose, which is useful where the two taxes pull in different directions.

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When does HMRC need to see the deed?

Only when it changes the tax. Under section 142(2A), if the variation means more inheritance tax is payable, the personal representatives must also join in the statement. They can refuse only if they hold insufficient assets to pay the extra tax. Section 218A then requires the variation to be sent to HMRC within six months of being made, with the amount of extra tax (IHTM35013 and IHTM35029). IOV2 says that if the variation does not change the tax payable you need not send it, but should keep a copy with the checklist.

Stamp duty is rarely an issue now. IHTM35060 explains that an exemption certificate is needed only where the instrument itself transfers shares or securities rather than a separate stock transfer form.

What are the common uses?

  • Skipping a generation. A child who does not need the money redirects it to their own children. The inheritance is not added to the child’s estate and there is no seven year clock.
  • Using exemptions. Redirecting to a surviving spouse or civil partner, or to charity, can increase the exempt part of the estate. A gift to charity by variation can also bring the estate within the 36% reduced rate, but section 142(3A) requires the charity to be notified of the instrument.
  • Dealing with a second death. IHTM35042 confirms that the personal representatives of a beneficiary who has died can vary that person’s entitlement under an earlier estate, provided it is still within two years of the first death. If the second estate’s beneficiaries lose out they should consent.
  • Joint property. IOV2 notes a variation can redirect the deceased’s share of jointly owned assets as well as assets they owned outright.

What cannot be varied?

Section 142(5) excludes settled property in which the deceased had an interest in possession, and property caught by the gift with reservation rules, from the estate that can be varied. IHTM35072 notes a narrow exception where the deceased had a general power of appointment and exercised it by will. A trust interest can, however, be disclaimed (IHTM35162).

The same property cannot be varied twice. IHTM35082 cites Russell v IRC (1988): once a variation of an item has been accepted under section 142, a further variation of any part of that item for the same death will not qualify. A beneficiary also cannot redirect a life interest after the life tenant has died, because the interest no longer exists (IHTM35042).

How is a variation different from a disclaimer?

A disclaimer is a refusal of the gift. IHTM35161 explains that it must cover the whole of the benefit, the beneficiary must not have taken any benefit from it, and they cannot say where it goes: it falls into residue or passes under the intestacy rules. A disclaimer in writing within two years still falls within section 142, and IHTM35162 confirms no statement of intent is needed. A variation is more flexible because the beneficiary chooses the new recipient, and section 142(6) allows it even after the estate has been distributed.

What about income tax?

There is no income tax equivalent. HMRC’s Trusts, Settlements and Estates Manual at TSEM1815 states that deeds of variation do not change the income tax position and that, where a variation puts property into trust, the settlor is the original beneficiary, not the deceased (Marshall v Kerr). So a parent who redirects an inheritance into a trust for their own minor children is the settlor for the settlements legislation, and income paid to the children can be taxed on the parent. The deed can also create a trust that must be registered, which TSEM1815 mentions.

How does a variation work in a real case?

Illustration only. Mary dies leaving her residuary estate to her son Tom. Eight months later Tom, who has a comfortable income, signs a deed redirecting £100,000 of investments to his daughter. The deed identifies the residuary gift in Mary’s will, includes the IOV2 statement for both taxes, and Tom receives nothing in return.

  • For IHT, the £100,000 is treated as left by Mary to her granddaughter. Mary’s estate tax is unchanged because Tom and his daughter are both chargeable beneficiaries, so there is nothing to send to HMRC. Tom has made no gift.
  • For CGT, the granddaughter acquires the investments at their probate value, so any growth since death is not Tom’s gain. See the CGT uplift on death.

Had Tom redirected the investments into a trust for a child under 18, TSEM1815 would make him the settlor for income tax.

What mistakes cause a variation to fail?

  • Signing after the second anniversary of the death, or one party signing late.
  • Leaving out the statement of intent, or relying on a separate letter. For instruments made from 1 August 2002 the statement must be in the instrument (IHTM35013).
  • A side payment to the beneficiary giving up their share. HMRC also looks closely at redirections to a spouse that are later passed back to the original beneficiaries (IHTM35093).
  • Trying to vary trust property or an asset already varied once.
  • Forgetting CGT. If the statement covers IHT only and the asset has already passed to the beneficiary, CG31660 treats the variation as a gift by that beneficiary at market value. See gifts and market value.

Executors should record any variation alongside the IHT account. Our pages on acting as executor, the nil rate band and quick succession relief cover related points.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.