In this section:
- How to value the estate of someone who has died - the basics
- How to value gifts for Inheritance Tax
- How to value joint property or assets for Inheritance Tax
- How to value the debts and liabilities of someone who has died
- How to value land and buildings for Inheritance Tax
- How to value stocks and shares for Inheritance Tax
How to value land and buildings
for Inheritance Tax
When someone dies, any land and buildings they own - or sometimes live in rent-free - are part of their estate for Inheritance Tax. So it's important to make a realistic estimate of their market value. Professional valuers can help you do this, but you don't have to use one.
On this page:
- Types of property to include in your valuation
- Using a professional valuer
- Estimating a property's market value
- Tax reliefs for properties used in business
- What if you under-value the property?
- What if you over-value the property?
- If the deceased lived rent-free in a property left in a will to someone else
Types of property to include in your valuation
When you work out the value of someone's estate you'll need to value any property they owned. The types of buildings and land that you may need to value could include:
- their home
- any other houses or flats they owned
- farms and farm land
- business properties like hotels, shops or factories
- other land and buildings - such as woodland, derelict land and lock-up garages
- any rights that are attached to land, like fishing or shooting rights
Using a professional valuer
Professionals like property valuers and chartered surveyors specialise in valuing land and buildings for people's estates. But you don't have to use a professional.
If the deceased person owned a lot of property, including things like business properties or farm land, then it may be helpful to use a professional valuer. They'll make sure the valuation is as accurate as possible. If you do use a professional you'll have to pay their fees, but you may be able to claim these back from the estate later.
If you don't use a professional you must take all reasonable steps to estimate a realistic market value for the property.
Estimating a property's market value
One way of making a realistic estimate of a property's market value is to look at what other very similar properties in the area are being advertised for. You could do this by looking through local estate agents' newspaper advertisements or by visiting their offices and asking them to value the property.
If you end up with a range of different values it's usually best to base your estimate on the middle of the range.
If the property needs repairs
If the property is in need of repair then it may be reasonable to reduce your estimate of how much it's worth. You should look into what it would cost to do the repairs.
If something makes the property more attractive to buyers
There may be something about the property that makes it particularly appealing to buyers. For example, an unusually large garden, or access to other development land, might make it very desirable to a builder or property developer.
If the property has features that make it more attractive to buyers then you may need to increase your estimate of its value.
Tax reliefs for properties used in business
There are different types of relief available for different types of property. Depending on what type of property it is and how it's used, it may qualify for:
- Business Relief
- Agricultural Relief
- Woodland Relief
For example, if the deceased person used some or all of the property in their business, it may qualify for Business Relief. This can reduce the amount of Inheritance Tax due.
More about Inheritance Tax Relief for property
What if you under-value the property?
Sometimes it may become clear before you apply for probate (confirmation in Scotland) that you got your valuation wrong.
For example, if you estimated that the property was worth £400,000, but you then got several offers of £450,000 for it, it may mean that this amount is a more realistic market value.
If you think your original estimate may have been too low you should reconsider it. Take into account the length of time since the person died and what has happened to the property market during that time.
If you find you've under-valued the property you must contact HM Revenue & Customs (HMRC) to tell them the new value.
What if you over-value the property?
If you sell any land or buildings in the estate within four years of the death for less than the value that you paid Inheritance Tax on, you may be able to claim relief for the loss.
Go to form IHT38 to claim loss relief
If the deceased lived rent-free in a property left in a will to someone else
Sometimes a person might live rent-free in a house that's been left in a will to someone else. For example, someone might leave a house to their daughter, but make provision in their will for their wife to live there rent-free for her lifetime. When their wife dies, the house passes on to the daughter.
When this happens it's treated as an 'interest in possession' trust for Inheritance Tax and you'll need to include a valuation of the property when you value the deceased person's estate (in the example above this would be the wife). You should use its market value at the time the person died.
Although the valuation makes up part of the deceased person's estate, any Inheritance Tax due on it should be paid by the trustees.
More about interest in possession trusts and Inheritance Tax
