How Is an Estate Valued for Inheritance Tax?

For inheritance tax purposes, assets are generally valued at their open market value at the date of death, meaning the price they could reasonably be expected to achieve if sold on the open market at that time. This applies across most types of asset, though the way that value is established varies depending on what is being valued.

Executors are responsible for making sure the valuations used are reasonable and can be supported if HMRC asks questions, which is why professional valuations are often obtained for higher-value or harder-to-value assets, such as property, business interests and valuable personal possessions.

Property is usually valued by a professional valuer or estate agent, particularly where its value affects whether inheritance tax is due, since an inaccurate valuation can lead to under or overpayment of tax. Savings accounts and cash are valued at the balance held at the date of death, including any interest accrued but not yet paid, and investments such as shares are valued according to specific stock exchange pricing rules for the date of death.

Pensions can be more complicated: some pension funds fall outside the estate for inheritance tax purposes, particularly certain defined contribution pensions held in trust for beneficiaries, while others may need to be included. This is an area where the rules can be technical and are also subject to review, so it is worth checking current guidance or getting advice, particularly for larger pension pots.

Personal possessions, sometimes called chattels, cars, jewellery, furniture, art and other belongings, also need to be valued at their open market value, not, for example, what was originally paid for them or their insured replacement value, which can be considerably higher. For everyday household items, a reasonable estimate is often sufficient, but valuable items such as antiques, art, jewellery or collections usually need a professional valuation.

Executors should be careful not to undervalue chattels simply because doing so seems administratively convenient; HMRC can and does query valuations that appear too low, particularly for higher-value estates, and getting it wrong can create problems later.

Assets held jointly, such as a joint bank account or a property owned as joint tenants or tenants in common, are still included in the deceased's estate for inheritance tax purposes, but the amount included depends on the type of ownership and, for accounts, evidence about who actually contributed the funds. A jointly owned property held as joint tenants generally has the deceased's share (often assumed to be an equal share, subject to evidence otherwise) included in the estate, even though it passes to the survivor by survivorship rather than under the will.

On the liabilities side, outstanding debts such as mortgages, loans, credit card balances and utility bills at the date of death, along with reasonable funeral expenses, are deducted from the value of the estate before calculating any inheritance tax due. Some liabilities, such as certain debts to family members or artificial arrangements designed to reduce the taxable estate, may be challenged by HMRC and not allowed as deductions, so it is worth taking care, and advice if in doubt, particularly for larger or more complex estates.

Because an accurate valuation affects both whether inheritance tax is due and how much, it is worth executors taking reasonable care and obtaining professional valuations for property, business interests and valuable personal items rather than guessing. Keeping good records at the time also makes it easier to answer any questions HMRC raises later.

My Posh Will helps you record details of your assets alongside your will, which can make life considerably easier for your executors when the time comes. A single will costs £69 and mirror wills cost £89, both one-off payments with lifetime access. Where an estate includes a business, agricultural property, overseas assets or is otherwise complex, use our suitability check, as professional advice on valuation and reporting is usually worthwhile.