How to value an estate for Inheritance Tax and report its value

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1. What you need to do

To find out if there’s Inheritance Tax to pay, you need to value the money, property and possessions (‘estate’) of the person who’s died.

You must do this before applying for probate (if you need it).

This guide is also available in Welsh (Cymraeg).

You need to complete 3 main tasks when you value the estate.

  1. Identify the deceased’s assets and debts such as savings, investments, mortgages and loans.

  2. Estimate the estate’s value. This will affect how you report the value, and the deadlines for reporting and paying any Inheritance Tax. Most estates are not taxed.

  3. Report the value of the estate - how you do this depends on whether you need to send full details of the estate and its value.

How long it takes

Valuing an estate can take several months, but it can take longer if it’s a big or complicated estate (for example if it involves trusts or there’s tax to pay).

Deadlines

There are only deadlines if the estate owes Inheritance Tax.

If it does, you’ll need to:

Getting help

You can hire a professional (for example a solicitor) to help with some or all of the tasks involved with valuing an estate.

Money Helper has guidance on when and how to hire a professional. Law Donut has advice on keeping solicitors’ fees down.

2. Identify assets and debts

Before you can value the deceased’s money, property and possessions (their estate), you’ll need to identify the things they owned (their assets) and their debts.

Assets include things like bank accounts, savings and pensions, as well as property, household goods and personal items.

Debts include things like utility bills, mortgages and money owed on credit cards. They also include funeral expenses, such as the cost of a funeral director, a headstone or plaque and refreshments.

You’ll then need to:

  • find out which organisations to contact (you can do this by searching through the deceased’s papers or asking friends, family and any solicitor or accountant they had)
  • write to these organisations asking for the value of the asset or debt when the person died (you’ll need to include a copy of the death certificate)

Which organisations to contact

Organisations that hold a person’s assets often include:

  • their bank
  • their pension provider - ask if you should include any private pension when you value the estate
  • their employer - the person may be owed wages
  • any companies they held shares in - include the number of shares, company details and the share certificate number (if you have it)
  • National Savings and Investments (NS&I) for Premium Bonds - use the free tracing service if you cannot find certificates
  • other organisations that hold assets like ISAs, shares, investments or assets in a trust
  • their landlord, if they had one - the person may have paid rent in advance

In your letter to the bank, also ask for:

  • any standing orders and direct debits to be stopped (or transferred if they were in a joint name)
  • a list of any share certificates or deeds they were holding for the person who died

If the person had a mortgage

Ask the mortgage lender if they require payments to continue while you’re applying for probate. If they do, you need to either:

  • pay these bills yourself - and reclaim them from the estate once you’ve got probate
  • check if the person had a life assurance or mortgage protection policy that covers these payments

3. Estimate the estate’s value

You need an estimate of the estate’s value (the deceased’s money, property and possessions), to find out if there’s Inheritance Tax to pay.

There’s normally no Inheritance Tax to pay if either:

  • the value of the estate is below the £325,000 threshold
  • you leave everything above the £325,000 threshold to your spouse, civil partner, a charity or a community amateur sports club

If the person who died was widowed or is giving away their home to their children, the tax threshold can be higher.

Working out your estimate

You need to estimate the total value of the estate. This includes:

At this stage, your estimate only needs to be accurate enough for you to know if the estate owes tax. You’ll need accurate valuations if the estate owes any tax.

You can work out the estimate yourself or you can use the Inheritance Tax checker.

Use the online Inheritance Tax checker

The checker will:

  • give you an approximate value of the estate
  • help you decide whether any Inheritance Tax is likely to be due or not

The checker does not:

  • calculate the amount of Inheritance Tax that’s owed
  • tell HMRC about the estate’s final value

Start now

Before you start

You’ll need the following information to estimate the estate’s value:

  • details of the person’s assets, including joint assets
  • details of any gifts they made

Valuing the assets

Start by listing the person’s assets - the things the person owned with a monetary value.

These may include:

  • their home
  • any other properties, buildings or land
  • money in banks, building societies or ISAs or cash in their home
  • stocks and shares
  • household and personal items, including furniture, paintings and jewellery
  • cars, caravans or boats
  • foreign assets, such as property abroad
  • money they’re owed, for example wages or refunds from household bills
  • payments when they died, for example life insurance or a lump sum ‘death benefit’ from a pension

Then estimate the value of each on the date the person died.

Include all assets in your estimate. This includes any left to the person’s spouse, civil partner or a charity - you will not pay tax on these assets.

For items such as jewellery, paintings or other household goods, work out how much you would have got if you’d sold them on the open market. You can use online marketplaces to help work out their value.

Valuing joint assets

You need to find out what assets the person owned with someone else and how they were owned.

The rules for valuing joint assets, such as property, jewellery or paintings, are different depending on whether they were owned as:

  • ‘joint tenants’ (known as ‘joint owners’ in Scotland)
  • ‘tenants in common’ (known as ‘common owners’ in Scotland)

Joint tenants

Joint tenants automatically pass on any assets, such as land or property, to the other owners if one of them dies.

If the asset, such as land or property, was owned as a joint tenant with the person’s spouse or civil partner, divide the value of the asset by 2.

If land or property was owned with other joint tenants, for example friends or siblings, do both of the following:

  • divide the value by the number of owners
  • take 10% from the share of the person who died

Example

The deceased owned a property as a joint tenant with 3 other people. The property is worth £200,000 on the date they died, giving them a £50,000 share (£200,000 divided by 4).

After 10% (£5,000) is deducted from the deceased’s £50,000 share, the final value is £45,000 (£50,000 - £5,000 = £45,000).

In Scotland, if land or property was owned jointly with others (excluding a spouse or civil partner), take £4,000 off the value of the whole asset before working out the deceased’s share.

Example

The deceased owned a property in Scotland as a joint owner with 3 other people. The property is worth £200,000 on the date they died.

After £4,000 is taken away from the total value of the property, this leaves £196,000 (£200,000 - £4,000).

When divided by the number of owners, the deceased’s share of the property is £49,000 (£196,000 divided by 4).

To value a joint bank account, divide the amount by the number of account holders, unless it’s in joint names for convenience only. For example, an older person may add their child to help them with the account. If so, use the amount the deceased actually owned instead.

Tenants in common

The rules are different for tenants in common as they do not automatically pass on any assets they jointly own.

If the deceased jointly owned property or land as a tenant in common, work out the value based on their share.

Working out the value of any gifts

You need to work out the value of any gifts made by the person who died.

Gifts only count towards the value of an estate if they were made in the 7 years before the person died and the total value of the gifts was over the £3,000 annual exemption.

If a person lives for 7 years after making a gift, there’s no Inheritance Tax to pay.

Any gift a person continued to benefit from before they died also counts towards the value of an estate - for example, if they gave away a house but lived in it rent-free (known as a ‘gift with reservation’).

There’s no Inheritance Tax to pay on gifts to charities or political parties.

What counts as a gift

A gift can include:

  • money
  • household and personal goods, for example, furniture, jewellery or antiques
  • a house, land or buildings
  • stocks and shares listed on the London Stock Exchange
  • unlisted shares held for less than 2 years before the person’s death

Checking for gifts

You can check for gifts by:

  • going through bank statements
  • talking to family members
  • looking through financial documents

Record the value of any gift and the date it was made.

Estimate the gift’s value

To estimate the value of each gift, use either:

  • the approximate value of the gift at the time it was made (realistic selling price)
  • the realistic selling price of the gift if the deceased continued to benefit from the gift after giving it away (a ‘gift with reservation’)

Debts

Do not include the estate’s debts when you estimate the gross value. You will however need to tell HM Revenue and Customs (HMRC) about any debts when you report the value of the estate.

Check for records of debts when the person died, for example:

  • their mortgage, loans, credit cards or overdrafts
  • ‘liabilities’ like household bills or bills for goods or services they’d received but not yet paid for (like building work, decorators, accountants)

What to do next

Check if you need to send full details of the estate’s value.

4. Check if you need to send full details of the estate

Before you report the value of the estate (the deceased’s money, property and possessions), check if you need to send full details of the estate so that you complete the correct forms.

The information you need to provide and how you do this depends on a number of factors, including whether Inheritance Tax is due or not.

You may have to pay a financial penalty if you give inaccurate information.

If Inheritance Tax is due

You’ll need to give full details of the estate if Inheritance Tax is due.

You can use the online checker tool to find out if Inheritance Tax is due.

Find out what you need to do if Inheritance Tax is due.

When to send full details of the estate’s value even if no tax is due

You’ll need to send full details of the estate, even if no tax is due, if the person who died:

  • gave away over £250,000 in the 7 years before they died
  • gave gifts then continued to benefit from them in the 7 years before they died
  • left an estate worth more than £3 million
  • was ‘deemed domiciled’ in the UK
  • had foreign assets worth more than £100,000
  • was living permanently outside the UK when they died but had previously lived in the UK
  • had a life insurance policy that paid out to someone other than their spouse or civil partner and also had an annuity
  • had increased the value of a lump sum from a personal pension to be paid after their death, while they were terminally ill or in poor health
  • had agreed that property they’d given away during their lifetime would be part of their estate rather than pay a pre-owned asset charge

There are different rules if the person died on or before 31 December 2021.

If the estate includes trusts

You’ll need to complete a full account if the deceased:

  • gave gifts that were paid into trusts
  • held assets worth over £250,000 in trust
  • held more than one trust

You’ll also need to complete a full account if assets held in trust passed to a surviving spouse, civil partner or charity and the trust was worth:

  • £1 million or more
  • £250,000 or more after the amount passing to the surviving spouse, civil partner or charity has been deducted

When full details are not needed - ‘excepted estates’

You do not have to give full details of an estate’s value if all of the following are true:

  • the estate counts as an ‘excepted estate’
  • there’s no Inheritance Tax to pay
  • you’ve checked that none of the reasons under ‘when you need to send full details of the estate’s value even if no tax is due’ apply

Most estates are excepted estates.

What counts as an excepted estate

An estate is usually an excepted estate if any of the following apply:

  • its value is below the current Inheritance Tax threshold
  • the estate is worth £650,000 or less and any unused threshold is being transferred from a spouse or civil partner who died first
  • the deceased left everything to a spouse or civil partner living in the UK or to a qualifying charity and the estate is worth less than £3 million (search the charity register for registered UK charities)
  • the deceased was living permanently outside the UK (a ‘foreign domiciliary’) when they died and the value of their UK assets is under £150,000

There are different rules for excepted estates if the person died on or before 31 December 2021.

What you need to do next

The process you need to follow depends on whether you’re dealing with:

Dealing with an excepted estate

You can report the value of an excepted estate if you apply for probate. Check if you need probate and apply for it if you do.

You do not need to report the value of an excepted estate if you do not need probate.

There is a different way to report an excepted estate if the person died on or before 31 December 2021.

Applying for probate in Scotland or Northern Ireland

There’s a different way to apply for probate if the deceased lived in Scotland or lived in Northern Ireland.

If you need help with probate or the value of the estate

Contact HM Courts and Tribunals Service if you’re not sure if you’ll need probate or if the value of the estate changes.

Courts and Tribunals Service Centre
Telephone: 0300 303 0648
Monday to Friday, 9am to 1pm
Closed on bank holidays
Find out about call charges
Webchat
Email: contactprobate@justice.gov.uk

If you need help with Inheritance Tax

Contact HM Revenue and Customs for questions about Inheritance Tax.

5. If Inheritance Tax is due or full details are needed

You must report the value of the estate to HM Revenue and Customs (HMRC) by completing form IHT400.

You must submit the form within 12 months of the person dying.

You may have to pay a penalty if you miss the deadline.

Getting accurate valuations

You’ll need to give accurate valuations when you complete the form.

You can get any property or land valued by an estate agent or chartered surveyor.

You can also get a professional valuation for anything worth over £1,500.

You can estimate the value of cheaper assets, such as ordinary household goods and personal items like furniture, electrical items, paintings or jewellery.

Report the value of the estate by completing form IHT400

You need to download and complete form IHT400. Send it to the address on the form.

You can read guidance on how to complete form IHT400.

You can ask HMRC to work out how much Inheritance Tax is due if you’re filling in the form without the help of a probate professional, such as a solicitor. You can do this when you fill in the form.

If you need help completing the form

Contact HMRC’s Inheritance Tax helpline for help with completing form IHT400.

How to amend a form after it’s been submitted

You need to fill in a corrective account form and send it to HMRC if you need to make any changes to information you’ve already submitted.

Paying Inheritance Tax

You must pay Inheritance Tax by the end of the sixth month after the person died. For example, if the person died in January, you must pay Inheritance Tax by 31 July.

You can pay in yearly instalments on certain things that may take time to sell, such as a house.

You’ll need to get an Inheritance Tax reference number from HM Revenue and Customs (HMRC) at least 3 weeks before paying any tax.

When you can apply for probate

Once you’ve sent your completed IHT400 form to HMRC, you need to wait for HMRC to send you a letter with a code before you apply for probate.

6. Records

You must keep certain records after you value an estate.

HM Revenue and Customs (HMRC) can ask to see your records up to 20 years after Inheritance Tax is paid.

You must keep copies of any:

  • will
  • copies of signed Inheritance Tax forms and supporting documents
  • records showing how you worked out the value of assets in the estate, for example an estate agent’s valuation
  • documents showing any unused Inheritance Tax threshold that can be transferred to a surviving spouse or civil partner
  • final accounts

Final accounts

Include any documents showing how you distributed money, property or personal belongings from the estate, for example:

  • letters from HMRC confirming that you paid Inheritance Tax
  • receipts showing debts paid, for example utilities bills
  • receipts for your expenses from dealing with the estate
  • written confirmation that ‘beneficiaries’ (anyone who inherited) received their share of the estate

Send copies of the final accounts to all beneficiaries.