What does a deed of variation actually change?
A will speaks from death and cannot be changed by the person who made it. What the law allows instead is for the people who benefit to rearrange their entitlements between themselves. A deed of variation, sometimes called an instrument of variation or a deed of family arrangement, is the document that records that rearrangement. It is signed by the beneficiary giving something up and directs where that benefit is to go instead.
Two statutory provisions make it more than a private agreement, and they are not the same provision twice. Section 142(1) of the Inheritance Tax Act 1984 treats a variation made within the period of two years after the death as if the deceased had made the gift, for inheritance tax. It applies only where the instrument contains a statement under section 142(2) that the subsection is to apply, made by all the relevant persons. Section 142(2A) makes those the people making the instrument and, where the variation results in additional tax being payable, the personal representatives too, who may decline only where they hold no sufficient assets to pay that tax. Section 142(3) removes the read back altogether where the variation is made for consideration in money or money's worth, other than another variation, so a payment between beneficiaries can undo the whole thing. Capital gains tax is a separate claim on a separate provision. Section 62(6) of the Taxation of Chargeable Gains Act 1992 stops the variation being a disposal by the beneficiary giving something up, and section 62(7) requires its own statement, so an instrument whose statement mentions only section 142 gets no capital gains protection at all. Note also what section 62(6) does not do. The date-of-death value comes from section 62(1), which applies on every death whether or not anybody varies anything, so the deed is not what produces it. What the deed buys is that the redirection itself is not treated as a disposal by the beneficiary giving something up. Where the section 62(7) statement is missing, that beneficiary has made a disposal, and the gain they are taxed on is the growth between the date of death and the date of the instrument, not the whole value of the asset (all checked 20 September 2026).
That reading back is the whole point. Without it, a beneficiary who passes an inheritance to their children has made a lifetime gift, which stays in their own estate for inheritance tax for seven years and may crystallise a capital gain, because they are treated as disposing of the asset at its market value even though no money changes hands, measured against the probate value they took it at. Checked 20 September 2026. With it, the gift is treated as the deceased's, and neither consequence follows.
A variation is different from a disclaimer. A disclaimer refuses the whole gift, and the beneficiary has no say in where it then goes. A variation lets the beneficiary choose the destination, and can deal with part of a gift rather than all of it.
Why do families use a deed of variation?
One reason is generational. A parent inherits from their own parent, does not need the money, and would rather it went to their children or grandchildren now. A variation moves it down a generation in one step and keeps it out of the middle generation's estate for inheritance tax.
The second is repair. Wills are often years old by the time they take effect. A grandchild born after the will was signed, a partner never provided for, or a division that no longer feels fair can all be corrected by the beneficiaries at their own expense. Where there was no will at all, an entitlement under the intestacy rules can be varied in the same way, which is how a surviving spouse sometimes redirects part of a statutory legacy to children.
The third is tax. Redirecting part of an estate to a surviving spouse or civil partner brings it within the spouse exemption. Redirecting a share to charity can qualify the estate for the reduced rate of inheritance tax of 36 per cent under Schedule 1A to the Inheritance Tax Act 1984, where the donated amount is at least 10 per cent of the baseline amount. Two points are routinely missed. The test is applied component by component, so one component of an estate can bear 36 per cent while another bears the full rate, and an election can merge components. And under section 142(3A) the reading back does not apply at all unless the charity has been notified of the instrument, so a variation that nobody tells the charity about achieves nothing. Passing a share of a property to a child rather than a spouse can make use of a nil-rate band that would otherwise be wasted. Each depends on the figures and needs advice before the deed is signed.
The fourth is protection. Where a beneficiary is in financial difficulty, divorcing, or receiving means-tested support, redirecting the inheritance is sometimes proposed. Care is needed, because a variation that deprives a beneficiary of an asset can still be treated as their gift for purposes other than inheritance tax, including deprivation of assets rules and insolvency law. In England the deprivation rules sit in section 70 of the Care Act 2014 and regulation 22 of the Care and Support (Charging and Assessment of Resources) Regulations 2014; in Wales they sit in section 72 of the Social Services and Well-being (Wales) Act 2014 and regulation 22 of the Care and Support (Financial Assessment) (Wales) Regulations 2015, which is a different regime and not the one English guidance describes. On insolvency, the provisions that bite are section 339 of the Insolvency Act 1986, transactions at an undervalue, which reaches back five years from the bankruptcy application, and section 423, which needs no bankruptcy at all where the purpose was to put assets beyond a creditor's reach. Where the beneficiary is already bankrupt the question is usually different again, because the inheritance may be after acquired property the trustee can claim.
What are the requirements for the variation to be read back for tax?
The conditions are strict and the two-year window does not extend. The table lists what HM Revenue and Customs looks for, and its form IOV2 is a checklist worth completing before the deed is signed.
| Requirement | What it means in practice |
|---|---|
| In writing | A deed is usual; a signed document is the minimum. A verbal agreement does not count. |
| Within two years of the death | Measured from the date of death, not the grant of probate. There is no extension. |
| Signed by everyone giving up a benefit | Beneficiaries whose entitlement is unchanged need not sign. A minor or a person lacking capacity cannot sign, and a court order is needed instead. For a minor, or for unborn or unascertained beneficiaries, that is an application to the High Court under the Variation of Trusts Act 1958, where the court can only approve an arrangement that is for that person's benefit. For an adult who lacks capacity it is the Court of Protection under the Mental Capacity Act 2005, where the test is best interests rather than benefit. HMRC puts the practical point bluntly: a parent's signature on behalf of a minor is not sufficient. Approval is needed where the variation adversely affects a minor or unborn beneficiary, not where their entitlement is untouched. |
| Statement of intent | The deed must say that section 142 of the Inheritance Tax Act 1984 and, where wanted, section 62 of the Taxation of Chargeable Gains Act 1992 are to apply. Leaving the statement out cannot be corrected later. |
| No consideration | The beneficiary cannot be paid, in money or money's worth, for giving up the benefit. The only thing that may be given in return is a variation of another disposition in the same estate. Where the benefit is land, note that taking over a mortgage can itself be consideration. |
| Each asset varied once | The same property or share cannot be varied twice. A second variation of the same asset is ineffective for tax. |
| Personal representatives join in where more tax is due | If the variation increases the inheritance tax payable, the personal representatives must join in the statement of intent, and section 142(2A) lets them decline only where there are not enough assets in their hands to pay the additional tax. The notification requirement is not in section 142 at all: section 218A requires a copy of the instrument and the amount of the additional tax to be delivered to HMRC within six months of the day the instrument is made, and that clock runs from execution, not from the death or the grant. Where no additional tax arises there is no such duty. |
| Assets passing by survivorship | A joint tenant's share that passed automatically to the survivor can be varied by the survivor as if it were part of the estate, because section 142(1) reaches dispositions effected by will, under the law relating to intestacy or otherwise, and survivorship is one of the otherwise. The practical point is that the reading back is a tax fiction only. It does not undo the vesting, so the personal representatives have nothing to assent: the variation has to be given effect by the survivor's own transfer or declaration of trust as registered proprietor. |
What changes when the asset is a property?
Redirecting money means the executors paying a different person. Redirecting a house or a share in one means changing who is registered as its owner, and the registration has to match the deed. Where the estate still holds the property, the personal representatives can assent it directly to the new beneficiary on HM Land Registry form AS1, or AS3 for part. What HM Land Registry actually needs with the assent is the application form, the grant of representation or a conveyancer's certificate that they hold it, the fee and any identity evidence. It does not call for the will or the deed of variation, and a personal representative can assent to whoever is entitled, whether by devise, devolution, appropriation or otherwise, under section 36 of the Administration of Estates Act 1925. Even where the register carries a Form C restriction, assents are expressly carved out of it. Where the original beneficiary has already been registered, a transfer on form TR1 from them to the new beneficiary is needed, again supported by the deed.
A transfer of land under a variation made within two years of the death is exempt from Stamp Duty Land Tax in England under paragraph 4 of Schedule 3 to the Finance Act 2003, provided nothing is given for it other than a variation of another disposition in the same estate. Wales is a different statute and the page should not be read across: there the tax is Land Transaction Tax and the provision is paragraph 6 of Schedule 3 to the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017, on the same conditions. The mortgage is where the two diverge in practice. Neither variation provision carries the exception for assumed secured debt that both countries give expressly to assents, so on the statutory words a mortgage taken over is consideration. HMRC nonetheless states in its Stamp Duty Land Tax Manual at SDLTM00560 that consideration for this purpose does not include any secured debt assumed. The Welsh Revenue Authority publishes the opposite view, that the assumption of a mortgage or other debt may itself be a compensation payment that defeats the exemption. So the mortgage position is checked before the deed is drafted, and where the estate still holds the property an assent by the personal representatives, which does carry the secured debt exception, may be the better route.
Timing matters most where the property is being sold. If the variation is signed before completion, the sale proceeds go to the new beneficiary directly and the capital gains position follows the reading back. If the sale completes first, unpicking the proceeds afterwards is harder than redirecting the asset would have been. Where we act on the executor sale, we check before exchange that the deed has been signed and that the transfer matches it. Selling an inherited home explains how the gain on such a sale is measured.
Where the property passes to more than one person under the variation, the deed should say whether they take as joint tenants or tenants in common and in what shares, because the assent or transfer will have to record it. Joint tenants or tenants in common explains the difference.
When is a deed of variation the wrong tool?
It cannot buy anything. A beneficiary who gives up a share in return for a payment from a sibling has made a sale, not a variation, and the reading back fails. It cannot be used by an executor to override a beneficiary: only the person losing the benefit can sign it away. It cannot be made for a child without the court's approval.
It does not rewrite the past for every purpose. The reading back is for inheritance tax and capital gains tax. For income tax there is no reading back at all: no provision corresponds to section 142, so the original beneficiary is treated as the settlor of any trust the variation creates. That matters under the settlements legislation in Part 5 Chapter 5 of the Income Tax (Trading and Other Income) Act 2005, and in particular section 629, under which income paid to or for an unmarried minor child of the settlor is treated as the settlor's own income, subject only to a 100 pound a year limit per child which operates as a cliff edge rather than an allowance. For means-tested benefits and residential care assessments, a variation can be treated as a deliberate deprivation by the beneficiary who signed it.
And it depends on the goodwill of the beneficiaries who lose out; if one refuses, the will stands. Do I need a will if I own property explains why the better course is to get the will right in the first place.
The deed itself, with its tax statements, needs advice on the estate's tax position before anyone signs, and that is not advice we give. Where the deed redirects a property, we register the result at HM Land Registry: an assent on form AS1 once the personal representatives hold the grant, or a transfer on form TR1 where the original beneficiary is already registered.