Before you can apply for probate and distribute an estate, you need a complete and accurate valuation of everything the deceased owned and owed at the date of death. This valuation is used to:
- Complete the inheritance tax return (IHT205 or IHT400)
- Determine whether IHT is payable and how much
- Support the probate application
HMRC has the power to challenge valuations it considers too low — particularly for property. Accuracy matters.
What to Value: Assets
Bank accounts and savings
Write to each bank with the death certificate and request the balance at the date of death. Banks can confirm this in writing. Include:
- Current accounts
- Savings accounts
- Fixed-term bonds (use the value at date of death, not at maturity)
- Premium Bonds (cash value, not any unclaimed prize)
- NS&I accounts
ISAs
ISAs lose their tax-free wrapper on death but are included in the estate at their full market value at the date of death. The provider will confirm the value on request.
Note: A surviving spouse may be entitled to an Additional Permitted Subscription (APS) equal to the ISA’s value — this is a separate application made to the ISA provider after the estate is settled. See the ISA Inheritance guide.
Stocks and shares (listed)
Listed shares (on the London Stock Exchange or other recognised exchanges) are valued at the lower of:
- Quarter up method: lower price + ¼ × (higher price − lower price)
- Average of highest and lowest daily dealing prices on the date of death
Use the Stock Exchange Daily Official List (SEDOL) or ask the registrar for the official closing prices. Stockbrokers and share registrars can provide formal valuations.
Property
Property is the most commonly disputed element of estate valuations. HMRC expects the open market value at the date of death — the price a willing buyer and seller would agree on arm’s length terms.
How to get a probate valuation:
| Method | HMRC acceptance | Cost |
|---|---|---|
| RICS-accredited surveyor | Best — specialist ‘Red Book’ valuation | £200–£500 per property |
| Estate agent written estimate | Acceptable — get 2–3 if possible | Usually free |
| Online estimates (Zoopla/Rightmove) | Not accepted as standalone evidence | Free |
For IHT purposes, HMRC’s District Valuer Service (DVS) reviews property valuations and can open an enquiry. An undervalued property is a common cause of IHT investigations. It is worth paying for a professional valuation.
Jointly owned property: Include only the deceased’s share. For a joint tenancy (50/50), that is half the market value. For tenants in common, include whatever share the deceased held.
Related party discount: If the deceased held a share in a property with a family member who continues to own it, a discount of 10–15% may be applied to reflect the difficulty of selling a partial interest. HMRC will need to be satisfied this is appropriate.
Business interests
Business interests require specialist valuation. Possible Business Relief from IHT (100% for qualifying businesses, 50% for minority interests in quoted companies) can significantly reduce the taxable value. Seek specialist advice early.
Pensions
Most defined contribution pensions are outside the estate for both probate and IHT purposes (until April 2027 changes take effect). However, the death benefits payable (lump sum, dependant’s pension) are relevant for notification purposes and may affect means-tested benefits.
Defined benefit pensions do not form part of the estate — what passes is the survivor’s pension, which is outside probate.
Household contents and personal possessions
Household contents are valued at their second-hand market value — not replacement cost. For most estates, a reasonable estimate is acceptable. For estates where IHT is payable, HMRC expects a reasonable effort at valuation; professional valuers are recommended for antiques, jewellery, art, or collections of value.
Vehicles
Use a valuation from a recognised source — such as the Glass’s Guide or a dealer’s written estimate. Use the value at date of death, not the MOT date or current date.
Life insurance
Life insurance policies in trust (written in trust for named beneficiaries) pass outside the estate — they are not included in the probate valuation. Policies not in trust (paying to “the estate”) are included at their payout value.
What to Value: Liabilities
All liabilities are deducted from the gross estate to produce the net estate on which IHT is calculated.
| Liability | Notes |
|---|---|
| Outstanding mortgage | Capital balance at date of death (not including future interest) |
| Unsecured loans | Balance at date of death |
| Credit cards | Balance at date of death |
| Overdrafts | Balance at date of death |
| Utility bills | Accrued to date of death |
| Estimated funeral costs | Deductible — obtain a realistic estimate |
| Tax liabilities | Income tax owed up to date of death (from final tax return) |
Funeral costs are deductible from the estate before IHT is calculated. Professional fees for estate administration (solicitors, accountants) can only be deducted from income generated during administration, not from the IHT calculation.
Gifts Made Before Death: The 7-Year Rule
Any gifts made in the 7 years before death that are not exempt must be reported on the IHT return. These are called potentially exempt transfers (PETs).
| Time before death | IHT treatment |
|---|---|
| More than 7 years | Fully exempt — no IHT |
| 6–7 years | Taper relief: 80% reduction in IHT charge |
| 5–6 years | Taper relief: 60% reduction |
| 4–5 years | Taper relief: 40% reduction |
| 3–4 years | Taper relief: 20% reduction |
| 0–3 years | No taper relief: full IHT rate applies |
Exempt gifts not included: Annual gift allowance (£3,000/year), gifts to a spouse or civil partner, gifts to charity, small gifts (£250/person/year), wedding gifts within limits.
The IHT Return: Which Form to Use?
| Estate type | Form required |
|---|---|
| Gross estate under £325,000 with no IHT to pay | IHT205 (simplified) |
| Gross estate between £325,000 and £1,000,000 with no IHT payable (using transferable NRB/RNRB) | IHT205 (if claiming excepted estate status) |
| Any other estate — property, business, significant gifts | IHT400 + relevant schedules |
Use HMRC’s excepted estate rules to determine whether IHT205 applies. When in doubt, use IHT400.