Families who have settled inheritance tax bills based on property prices at the time of their loved one’s death may have a case to claim back thousands of pounds in overpaid tax if the price drops.

Special rules in the HM Revenue and Customs tax manuals for inspectors show that families can reclaim tax with the sale of land relief rules.

These rules say an ‘appropriate person’, who is generally an executor of the estate, can ask for the value on death used to calculate inheritance tax to be switched to the actual sale value of the property if the claim is made within four years of the death.

With inheritance tax charged at 40%, this amounts to a tax saving of £400 for every £1,000 downward adjustment of a property’s value.

Falling house prices mean most properties have lost somewhere between 12% – 20% of their value over the past two years despite slow increases in value over recent months.

HMRC will only accept claims if the sale value is either  £1,000 or 5% below the value on death, whichever is the least.

The relief works like this:  T died in August 2007. T’s house was valued for probate at £200,000.

In December 2009, T’s executors sold the house oin the open market for £150,000.

The executors claimed sale of land relief. The date of death value of the house for IHT was reduced to £150,000.

Because the £50,000 was more than £1,000 or 5% of the value on death (£10,000), the claim was allowed saving £50,000 x 40% in inheritance tax, or £20,000.

• Before making any claim, discuss the circumstances with an estate planning professional as this article is based on general advice that may not suit everyone’s personal financial affairs.

The best comment on this election is whether the next prime minister needs a house in multiple occupation licence for 10 Downing Street.

If so, the local council will have to judge home a ‘fit and proper’ person to manage the government.

In seriousness this election does not really mean much to property investors.

The only sure thing for buy to let landlords, property investors and developers is house prices are likely to stay flat while taxes and mortgages rates are hiked up gradually over the coming year or so.

Whoever sits in the big chair at No 10 really doesn’t have a choice – they have to raise taxes to pay for the economic crisis Labour and the banks dumped on the country. Gordon Brown was a dead man walking after picking up the poison chalice of government from Tony Blair. The poor guy was pretty much battered by the system and he didn’t know how to react other than to lie down and take it.

The next incumbent will have to deal with raising taxes and making cuts.

It’s a bit like rearranging deck chairs on the Titanic.

Capital gains tax (CGT) is likely to be a casualty.  The current rate of 18% does not make sense – it’s got to be tied back in with a rate that’s the same as the taxpayer’s highest rate because it just doesn’t make sense to sell investments at a lower tax rate than the general rate of income tax.

Property investors who want to dispose of homes should look at sealing the deal before the first post-election budget that is predicted within 60 days. The clock is ticking to take advantage of the low CGT rate.

Inheritance tax is the next big hitter. The Tories have indicated during their campaign that the threshold will rise to £1 million.

Houses in multiple occupation (HMO) are an interesting one. David Cameron has gone on record as intending to repeal the new planning and licensing rules that were introduced on April 6. This would be a major reversal of policy after Labour hung so much stock on demonising landlords with the new regulations.

If HMOs go, it’s likely the online ‘rate your landlord’ web site will be another casualty as well.

Likewise, furnished holiday lets need action too. The current rules run out on June 30 and the Tories successfully negotiated the removal of Labour’s new holiday let tax laws from the last Budget. There seems little point in supporting second home and holiday let owners in the run up to a vote only to forget the promise afterwards.