IHT Probate Valuation UK: How to Value the Estate for Inheritance Tax — Open Market Value, Asset Classes, and HMRC
Every asset must be valued at its open market value at the date of death for IHT. Property is valued by estate agents or surveyors; shares use the HMRC quarter-up formula; unquoted business shares need a specialist. HMRC's VOA and SAV teams routinely challenge valuations — get them right from the start.
How to Value Each Asset Class for IHT
The open market value standard: section 160 IHTA 1984
The starting point for all IHT valuations is section 160 IHTA 1984, which defines the value of an asset as 'the price which the property might reasonably be expected to fetch if sold in the open market at that time; but that price is not to be assumed to be reduced on the ground that the whole property is to be placed on the market at one time.' The open market value is a hypothetical price — what a willing buyer would pay and a willing seller would accept, both being fully informed and neither being under compulsion. The valuation date is always the date of death (not the date when the estate is administered, or the date when a grant of probate is obtained). If asset values have changed significantly between death and probate, the date-of-death values control the IHT — the executor may benefit from lower values (loss on sale relief under s178 IHTA 1984 for shares and s190 for land) if the assets are sold for less within 12 months (shares) or 4 years (land) of death.
Valuing residential property (including the family home)
Residential property is typically valued by a professional RICS-qualified surveyor or estate agent at the date of death. The valuation should reflect the open market value in the condition the property was in at the date of death. For a standard residential property: instruct a local estate agent (or a RICS surveyor for a formal Red Book valuation) to provide a written opinion of value at the date of death. For jointly owned property: only the deceased's share is included in their estate. A 50% share in a property worth £500,000 is not simply valued at £250,000 — a co-ownership discount (typically 10–15%) may be applied, reflecting the fact that a fractional interest is harder to sell than the whole. HMRC's Valuation Office Agency (VOA) reviews property valuations — it is common for the VOA to challenge and upward-revise estate agent valuations, particularly where comparable evidence supports a higher value. Executors should commission an accurate valuation rather than undervaluing to reduce IHT (HMRC has extensive powers to investigate and surcharge for undervaluation).
Valuing quoted shares and unit trusts
Quoted shares (listed on the London Stock Exchange, AIM, or other recognised exchanges) are valued using the 'quarter-up' formula: the value is the lower of: (a) the mid-market price on the date of death plus one quarter of the difference between the highest and lowest prices on that day; or (b) halfway between the highest and lowest prices for bargains done on that day. This is the standard HMRC formula for listed share valuations — the formula is set out in HMRC guidance and is applied to the daily Stock Exchange price records at the date of death. For shares listed on the London Stock Exchange or AIM: obtain the daily Official List or SEDOL prices for the date of death. For unit trusts, OEICs, and investment trusts: use the closing bid price on the date of death. For ISA portfolios: value each holding separately and declare the total.
Valuing unquoted shares and business interests
Unquoted (private company) shares are significantly harder to value for IHT than quoted shares — there is no market price. The valuation of unquoted company shares for IHT purposes is governed by the 'open market value' test under s160 IHTA 1984, applied on a hypothetical arm's-length sale. HMRC provides detailed guidance on methods for valuing unquoted shares: (1) Net asset value (NAV): value the underlying assets of the company; applicable where the company is asset-backed (property, investments) rather than trading. (2) Earnings multiple: capitalise the maintainable earnings of the business at an appropriate multiple; applicable to profitable trading companies. (3) Dividend yield: applicable to minority shareholdings paying regular dividends. (4) Discounts: minority discounts (10–35%) apply where the deceased held less than 50% of the shares. A specialist valuation (accountant or HMRC-experienced share valuer) is needed for unquoted company shares — the valuation is often the subject of negotiation with HMRC's Shares and Assets Valuation (SAV) team.
Valuing other assets: cash, insurance, pensions, and personal possessions
Other common estate assets are valued as follows: (1) Cash and bank accounts: the balance on the date of death (including accrued interest to date of death). (2) Life insurance policies not written in trust: the sum assured (the payout on death). Insurance written in trust is outside the estate. (3) Pension funds: under current rules (until April 2027), defined contribution pension funds in drawdown or uncrystallised are outside the estate. Final salary/defined benefit pensions: the capitalised value of the income stream (a lump sum multiple applied to the annual pension — typically 20–25× the pension income) is included where the scheme terms provide death-in-service benefits or a pension payable to dependants. (4) Personal possessions (furniture, jewellery, art, antiques, cars): valued at the price they would fetch at a specialist auction. Household contents can be valued by a professional household contents valuer or by a detailed schedule. Significant items (jewellery above £500, individual pieces of art, antiques) should be individually valued — HMRC scrutinises high-value personal property closely.
Reporting the estate valuation: IHT400, IHT205, and the online return
The estate valuation is reported to HMRC on one of two forms: (1) IHT400 (full estate account): required for chargeable estates (those that owe IHT) and for estates exceeding the excepted estate threshold (currently £3 million gross value or £1 million net estate after reliefs). IHT400 must be filed with HMRC before a grant of probate can be obtained (usually in advance, to allow HMRC to process the IHT). (2) Excepted estate return: available for smaller, simpler estates (below the excepted estate threshold). An online or simplified paper return is submitted. Additional supplementary pages accompany the IHT400 for specific asset types: IHT405 (land and property); IHT406 (bank and building society accounts); IHT407 (household and personal goods); IHT408 (household and personal goods if any item exceeds £1,500); IHT409 (pensions); IHT410 (life assurance and annuities). Valuations must be provided in good faith based on available information — updating the return later (with corrective accounts) is straightforward where additional information emerges.
Frequently Asked Questions
What date should estate assets be valued at for IHT?
All estate assets must be valued at the date of death — the open market value on that specific day. This applies to property, shares, bank balances, personal possessions, and all other assets. The date of probate (when the grant is obtained) is irrelevant for IHT valuation purposes. If asset values have fallen between the date of death and a subsequent sale (within 12 months for shares, 4 years for land), loss on sale relief may reduce the IHT.
Who values the house for IHT?
The house is typically valued by a local estate agent or a RICS-qualified surveyor at the date of death. The valuation should be in writing, reference the date of death, and explain the methodology. HMRC's Valuation Office Agency (VOA) routinely reviews property valuations submitted with the IHT400 — if the VOA believes the value is too low, it will open an enquiry and propose a higher value. Executors should aim for an honest, well-supported valuation rather than an optimistic low estimate.
How are jointly owned assets valued for IHT?
Only the deceased's share of a jointly owned asset is included in their estate. For joint tenancy property (where the right of survivorship applies), the deceased's share passes to the surviving owner automatically — but it is still included in the deceased's estate for IHT. The valuation of the share may include a co-ownership discount (typically 10–15%) to reflect the difficulty of selling a fractional interest. The co-ownership discount must be agreed with HMRC's VOA for property — it is not automatic.
Do I need a solicitor to do the IHT valuation?
No — a solicitor is not required to value the estate. Executors can gather valuations themselves: estate agents for property, stockbrokers' records for shares, bank statements for cash, and auction house estimates for personal possessions. For complex estates (unquoted shares, business interests, agricultural land, overseas assets), specialist professional valuations are advisable. A solicitor or probate specialist can coordinate the process and complete the IHT400 — but the underlying valuations come from specialists in each asset class.
What happens if HMRC disputes the estate valuation?
HMRC's Valuation Office Agency (VOA) reviews property valuations, and HMRC's Shares and Assets Valuation (SAV) team reviews business and unquoted share valuations. If HMRC considers the valuation too low, it will open a 'post-transaction valuation check' or formal enquiry and propose a higher figure. Executors have the right to dispute HMRC's proposed value — providing comparable evidence for property or updated accountancy valuations for business assets. If agreement cannot be reached, the dispute goes to the First-tier Tribunal (Tax). Most valuation disputes are settled by negotiation before reaching tribunal.
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