Listed Shares and IHT: How Quoted Shares Are Valued and Taxed on Death
Quoted shares in a death estate are valued using the lower of the quarter-up rule and the mid-bargain rule, using prices from the date of death. ISA wrappers provide no IHT protection. Where shares are sold below probate value within 12 months, HMRC's loss on sale relief (IHTA 1984 s178) can reduce the IHT liability.
Share Valuation Methods for IHT
| Method | Formula | Example |
|---|---|---|
| Quarter-up rule | Lower price + ¼ × (Higher price − Lower price) | Prices: 200p (lower) and 220p (higher). Quarter-up: 200 + ¼ × (220 − 200) = 200 + 5 = 205p. |
| Mid-bargain rule | ½ × (Highest bargained price + Lowest bargained price) | Transactions on the day ranged from 198p to 214p. Mid-bargain: ½ × (198 + 214) = 206p. |
| IHT valuation | Lower of the two above figures | Quarter-up = 205p; mid-bargain = 206p. IHT valuation: 205p (the lower figure). |
Loss on Sale of Shares Relief (IHTA 1984 s178)
Where the estate includes quoted investments that fall in value after the date of death and the personal representative sells them below the probate value, the lower sale price can be substituted for the probate value — reducing the IHT charged on those investments.
The relief must be claimed within the statutory time limit (Form IHT35, within 5 years of the IHT account or 6 years of death). It applies to all qualifying investments sold within the first 12 months after death — not just those that fell in value. If the portfolio as a whole shows a net loss (total sale proceeds less than total probate values), the relief reduces the IHT bill accordingly.
This relief can be very valuable when markets fall between death and the date of sale. During the 2020 market crash, for example, executors who sold equity portfolios in March 2020 shortly after a January 2020 death could claim substantial relief on the market-value reduction. Executors should always consider whether a s178 claim is available before finalising the IHT account.
Frequently Asked Questions
How are quoted shares valued for Inheritance Tax purposes?
Quoted (listed) shares are valued for IHT under IHTA 1984 s160 and the Inheritance Tax (Delivery of Accounts)(Excepted Estates) Regulations. The Stock Exchange Daily Official List (SEDOL) provides the official opening prices. The value used for IHT is the lower of two methods: (1) THE QUARTER-UP RULE: lower quoted price + ¼ × (higher quoted price − lower quoted price). Example: if the lower and higher prices for a share are 200p and 220p, the quarter-up value is 200 + ¼ × 20 = 205p. (2) THE MID-BARGAIN RULE: the midpoint of the highest and lowest actual bargained prices (trades) on the day of death. Where the London Stock Exchange was open on the date of death, both methods apply and the lower figure is used. Where the Stock Exchange was closed on the date of death (weekends, bank holidays), the values from the last trading day and next trading day are compared; the lower of the two calculated values is used. For large share portfolios, the valuation is typically done by a stockbroker or accountant using the official list prices on the date of death.
What is HMRC's loss on sale of shares relief and how does it work?
Under IHTA 1984 ss178–198 (Investment Relief), where the personal representative (executor) sells quoted investments within 12 months of the date of death at a price below the probate value (the value used for IHT), they can claim relief. The effect of the claim is to substitute the sale price for the probate value — reducing the IHT assessed on those shares. The claim is made on Form IHT35 and must be submitted within 5 years from the delivery of the account (Form IHT400) or within 6 years of death, whichever is earlier. Key conditions: (1) The disposal must be made by the personal representative — not by the beneficiary after the estate has been transferred. (2) The sale must be within 12 months of the date of death. (3) The claim covers ALL qualifying investments sold within the 12 months — you cannot cherry-pick losses while ignoring gains. If the total of ALL qualifying investments sold in the 12 months results in a net gain (total sale proceeds above total probate values), no s178 claim can be made. The loss and gain positions must be set off against each other. (4) The relief can be substantial where markets have fallen significantly between the date of death and the date of sale.
Are shares held in an ISA subject to IHT?
Yes — Individual Savings Accounts (ISAs), including Stocks and Shares ISAs and Cash ISAs, are part of the taxable estate for IHT. The ISA wrapper provides income tax and CGT exemptions during the investor's lifetime and for a period after death — but it provides no IHT exemption. A £500,000 Stocks and Shares ISA portfolio is fully included in the taxable estate at its market value at the date of death. The ISA wrapper ends on death (or, under the Additional Permitted Subscription rules, after a continuing period if the surviving spouse claims). Strategies to reduce IHT on ISA portfolios: (1) AIM ISA: since AIM shares held in an ISA can qualify for 50% BPR from April 2026 (down from 100%), a portfolio of AIM shares in an ISA provides some IHT mitigation. (2) Regular gifting from ISA income or withdrawals during lifetime (PETs, annual exemption). (3) Life insurance in trust. There is no IHT relief specifically for ISA accounts.
How are shares held ex-dividend valued for IHT?
When a share is quoted ex-dividend (xd), the quoted price has already been reduced to exclude the forthcoming dividend — the buyer will not receive the next dividend because it belongs to the seller. For IHT, shares quoted ex-dividend at the date of death are valued at the ex-dividend price, but the accrued dividend that will be received shortly after death is also a separate asset of the estate. The combined value — ex-dividend price plus the accrued dividend receivable — effectively reflects the full value. In practice, the dividend is shown as a separate asset on the IHT account (Form IHT400, schedule IHT411) alongside the share value. Executors should note all shares held ex-dividend at the date of death and ensure both the share price and the pending dividend receivable are included in the estate valuation.
Do quoted shares qualify for Business Property Relief or other IHT reliefs?
Quoted shares listed on a recognised stock exchange do not qualify for 100% BPR — BPR applies to unquoted shares and AIM shares (AIM is not a recognised stock exchange for BPR purposes). From April 2026, AIM shares attract 50% BPR (reduced from 100%). Quoted shares on the main London Stock Exchange, FTSE 100, FTSE 250, and other recognised exchanges are fully in the taxable estate at 40% IHT above the nil-rate band. There is no specific IHT relief for quoted investments (other than the loss on sale of shares relief discussed above). For IHT planning with share portfolios: (1) Gifting quoted shares to children is a PET — no IHT if the donor survives 7 years (but may trigger CGT on the gain). (2) Holding AIM shares (50% BPR from April 2026) as part of a portfolio provides some mitigation. (3) Placing shares in trust or selling and reinvesting in EIS/SEIS companies (unquoted, qualifying for 100% BPR) is more aggressive planning. (4) The loss on sale relief reduces IHT on estates where the market falls before probate assets are sold.
What happens to shares in a foreign company held by a UK domiciled (or LTR) person?
A UK-domiciled person (or long-term UK resident from April 2025) is subject to IHT on their worldwide assets, regardless of where the assets are situated. Foreign-listed shares held in a UK brokerage account or overseas are included in the IHT estate at their market value at the date of death. The valuation follows the same quarter-up/mid-bargain approach using the official stock exchange price on the date of death in the relevant market. If the foreign country also levies an inheritance or estate tax on the same shares (as some jurisdictions do), double taxation relief is available under IHTA 1984 s158 (unilateral relief) or under a specific bilateral double taxation convention. The UK has IHT double tax treaties with France, India, South Africa, USA, Pakistan, Netherlands, Sweden, Italy, and a few others. Where no treaty applies, unilateral relief under s158 may reduce the UK IHT charge to the extent that foreign tax has been paid on the same asset.
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