Gifts by cheque that clear after death

A gift made by cheque is not complete until the cheque clears, because until then the giver can stop it. If the giver dies before the cheque is paid, the gift fails: the money is still in their bank account and is taxed as part of the estate, and the executors cannot deduct the uncleared cheque as a debt. HMRC’s guidance is at IHTM14882 and IHTM28300.

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Why is a cheque gift not complete when it is handed over?

A cheque is not money. HMRC describes it as a revocable mandate, an instruction to the giver’s bank to pay, which can be revoked at any time until the bank clears it (IHTM28300). Until it clears, the giver still owns the money in the account and the recipient has nothing they can enforce.

HMRC relies on two cases. In Re Owen, Owen v IRC [1949] 1 All ER 901, the court held that a gift by cheque is not complete until the cheque is cashed, and the Special Commissioner applied the same principle to Inheritance Tax in Curnock v IRC [2003] STC (SCD) 283 (IHTM14882). The date the cheque was written is immaterial. What counts is the date it clears.

The Inheritance Tax legislation has no special rules for dating gifts, so the general law decides when each type of gift becomes effective (IHTM14881). Cheques are simply the most common case where the date of handing over and the date of the gift are different.

What happens if the giver dies before the cheque clears?

Death stops the cheque. Section 75 of the Bills of Exchange Act 1882 provides that a bank’s duty and authority to pay a cheque drawn by its customer end on countermand of payment or on notice of the customer’s death. Once the bank knows of the death, it should not pay.

The Inheritance Tax result follows from the gift being incomplete:

the money never left the estate, so the full bank balance at the date of death is included in the estate;
there was no lifetime gift, so nothing is added to the lifetime transfers on the IHT400 and no annual exemption is used;
the uncleared cheque is not an allowable debt of the estate, and HMRC officers are told to challenge a deduction where the tax at stake is worthwhile (IHTM28300).

HMRC’s guidance confirms the same position applies in Scotland: a gift by cheque is not complete until the cheque is cleared (IHTM28300).

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Is it different if the cheque paid for goods or services?

Yes. In strict law an uncleared cheque is not a debt, but HMRC accepts a deduction for cheques the deceased signed for consideration in money or money’s worth, where this is reflected in the assets of the estate. HMRC’s examples are a cheque to pay for building work or for goods supplied (IHTM28300). The underlying bill is a genuine liability, and the general rules for deducting debts from an estate apply.

The IHT400 instructions ask executors to say who any uncleared cheques were written to and what goods or services they were for. If that information is missing, HMRC may raise an enquiry where the sums are worthwhile (IHTM28300). When completing the IHT400, list gift cheques separately from bills so that the correct items are deducted.

Does the clearance date affect the seven years and the annual exemption?

It can. Because the gift happens when the cheque clears, every timing rule runs from that date.

The seven year clock. A potentially exempt transfer drops out of charge only if the giver survives seven years from the date of the gift. A cheque handed over on a birthday but banked weeks later starts the clock weeks later. See the seven year rule.
The annual exemption. The £3,000 annual exemption applies per income tax year, 6 April to 5 April (IHTM14141). A cheque written on 3 April but cleared on 8 April is a gift in the new tax year. That may use the wrong year’s exemption, or leave the earlier year’s exemption unused. See the annual and small gifts exemptions.
Same day gifts. The rules for transfers made on the same day treat them as one combined transfer. HMRC says that where several cheques are written, those rules apply only if the cheques clear on the same day (IHTM14882).

Can the family honour the gift after the death?

The payee has no legal claim, so executors are not obliged to pay. If the people inheriting the estate want the intended recipient to have the money, the usual route is a deed of variation under section 142 of the Inheritance Tax Act 1984, made in writing within two years of the death and containing a statement that section 142(1) is to apply. The Act then applies as if the deceased had made the gift in the will. Without a valid variation, a payment by a beneficiary out of their inheritance is a gift by that beneficiary, starting their own seven year clock.

A gift in contemplation of death, known as a donatio mortis causa, does not change the tax position. HMRC treats property given this way as remaining part of the estate at death (IHTM14900).

What does this look like in practice?

Illustration only. Graham writes a cheque for £10,000 to his granddaughter on 28 March. She is travelling and does not pay it in. Graham dies on 10 April. His bank balance at death includes the £10,000.

There is no lifetime gift of £10,000, so it is not listed as a gift on the IHT400 and does not use any annual exemption.
The £10,000 is part of the estate and the executors cannot deduct it as a liability.
If Graham’s will leaves everything to his son, the son could give the granddaughter £10,000 by a deed of variation within two years of the death.

Had the cheque cleared on 2 April, there would have been a completed lifetime gift in the tax year ending 5 April, covered by that year’s annual exemption if it was still available.

How should someone making cheque gifts protect the position?

Ask the recipient to bank the cheque promptly, particularly near the end of a tax year or where the giver is unwell.
Keep a record of each gift showing the date it cleared, not just the date written. The page on keeping records of lifetime gifts explains what else to keep.
Where a deadline is close, check that the money has actually left the account rather than relying on the date on the cheque.

Which mistakes come up most often?

Deducting uncleared gift cheques from the estate as debts. HMRC will disallow them.
Dating gifts by the cheque date when listing lifetime transfers, which can put gifts in the wrong tax year or inside the seven year window when they should be outside it, or the reverse.
Assuming the bank will pay a cheque presented after death. Once notified of the death, its authority to pay ends.
Forgetting to tell HMRC who uncleared cheques were paid to, which invites questions.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.