HMRC Inheritance Tax: Customer Guide

How do I value land and buildings?

What value should I use?

You should use the open market value for the deceased’s home and any other land and buildings the deceased owned.

Do I have to get a professional valuation?

You do not have to get the property professionally valued, but you must take all reasonable steps to put a value on the property. Advertisements in the local estate agents and newspapers for properties that are very similar to the deceased's property may help you to make a realistic estimate of the value.

What about the condition of the property?

You should take account of the state of repair of the property (which may decrease its value). But you must also take account of any features that might make it attractive to a builder or developer, such as large gardens, or access to other land that is suitable for development (which may increase its value).

What if I find there is a range of values for the property?

If you come to a range of values for the property, it is probably best to adopt a value that is somewhere in between the highest and lowest values that you have got.

What if I find out later that the property is worth more than my initial estimate?

If, having arrived at your figure and before you apply for a grant, you find out about other information that casts doubt on your estimate, you must reconsider it. For example, if you have estimated that the property was worth £150,000, but when you try to sell the property you market it at £170,000 and receive some offers in that figure or more, it suggests that the open market value for the property may be more like £170,000. We recommend that you do reconsider your figure, taking into account such things as the length of time since the death and movements in the property market and, if necessary, change your figure.

What about other land and building besides the deceased’s home?

You should include the open market value for any other land and buildings that was owned by the deceased. This will include

  • farms
  • business property, for example a hotel, shop, factory etc,
  • timber and woodlands,
  • other land and buildings such as lock-up garages, redundant or derelict land, quarries, airfields etc, and
  • other rights that attach to land such as fishing or shooting rights.

You should value the property as we explained above, although it is more likely you may need professional advice if the estate contains this sort of land. Write the address or location of the property in the space provided.

How do you value the right to live in a house?

It is very common for a married couple or civil partners to own their house jointly. Usually, they own their house as joint tenants and on the death of the first to die; their share passes automatically to the survivor, so that when the survivor dies, the whole property is part of their estate.

If, however, a married couple or civil partners own their house as tenants-in-common, the first to die can say what is happen to their share of the property in their Will. The Will might say something along the lines that

"….while my husband/wife/civil partner remains alive and desires to reside in the property and keeps the same in good repair and insured to its full value with insurers approved by my trustees and pays all rates, outgoings etc my trustees shall not make any objection to such residence and shall not disturb or restrict it in any way and shall not take any steps to enforce the trust for sale or to realise (sell) any share therein or to obtain any rent or profit from the property…".

On the survivor's death, the property passes on to someone else: usually a child.

So the surviving spouse or civil partner continues to live in the house, owning half of it in their own name and occupying the other half under the protection of the Will. Although the Will does not talk in terms of leaving the property in trust for the husband/wife/civil partner for life, the wording is such that, for inheritance tax, it has the same effect.

If you are dealing with the survivor's estate and they occupied their matrimonial or civil partnership home (or a property that replaced it) under such terms, you will need to treat the survivor's estate as if they were entitled to benefit from a trust.

The same rules about trusts apply. So an interest in the house is a 'trust' asset and the open market value of the house (or a share of the house) should be included as trust property.

If, within 7 years of their death, the survivor ceases to occupy the property, or the property is sold and not all the proceeds are reinvested in a replacement property, The survivor will be treated as making a transfer of the trust capital in which they ceased to benefit. You should include that value as a gift.

What happens if land or buildings are sold for less the value on which IHT was paid?

If land or buildings are sold within four years of the date of death for less than the value on which inheritance tax was paid, you may be able to claim relief for loss on sale of land using form IHT38. Full instructions for making the claim are given on the form.