Valuing an Estate for Probate UK: Property, Assets, Debts & IHT205/IHT400 2025

Valuing an estate accurately for probate is one of the most important tasks for executors. Get it wrong, and you could face penalties from HMRC or overpay Inheritance Tax. This comprehensive guide explains exactly how to value every type of asset, which form to use, and how to avoid common mistakes.

Why Accurate Estate Valuation Matters

When someone dies, their executor must calculate the total value of everything they owned (the "estate") as at the date of death. This valuation is used to:

• Calculate Inheritance Tax (IHT) - to determine if tax is due and how much
• Apply for probate - the grant of probate cannot be issued without this
• Distribute the estate - to know what's available for beneficiaries

What is "Date of Death" Valuation?

All assets must be valued at their market value on the date the person died, not:

• What the deceased originally paid for them
• What they're worth today
• What you hope to sell them for
• Their insurance value (usually higher)

Market value means: The price the asset would reasonably fetch if sold on the open market at the date of death.

Overview: What Needs to be Valued

You must value everything the deceased owned:

Valuing Property (Usually the Biggest Asset)

UK Residential Property

Property valuation is critical as it's usually the largest estate asset. HMRC pay particular attention to property values.

Option 1: Estate Agent Valuations (Free)

• Contact 3 local estate agents
• Request written valuation "for probate purposes"
• Average the three valuations
• Pros: Free, quick (2-3 days typically)
• Cons: HMRC may challenge if seems low

Option 2: RICS Surveyor Valuation (£150-500)

• Professional qualified surveyor inspection
• Detailed written report
• Pros: HMRC rarely challenges, legally robust, worth it for high-value properties
• Cons: Costs £150-500

Jointly Owned Property

If property was jointly owned, the treatment depends on ownership type:

Joint Tenants (most married couples):

• Property passes automatically to surviving owner
• BUT still include 50% of value in deceased's estate for IHT purposes
• Example: House worth £400K, include £200K in estate valuation

Tenants in Common:

• Deceased owned specific percentage share
• Include their share percentage in estate
• Example: Owned 60% of £300K property = include £180K in estate

Property Abroad

Foreign property must be included in UK estate for IHT:

• Get professional valuation in local currency
• Convert to GBP using HMRC exchange rates for date of death
• Seek specialist advice - complex double taxation rules apply

Mortgaged Property

Important: Value property at GROSS value (full market value), then deduct mortgage as a debt separately.

Valuing Bank Accounts and Savings

Contact every bank and building society where the deceased held accounts:

What to Request

Ask for:

• "Date of death balance" - exact balance at close of business on death date
• Interest accrued from last statement to death date (this is also part of estate)
• Written confirmation on bank letterhead

Banks provide this free for probate purposes.

Types of Accounts to Check

• Current accounts
• Savings accounts
• ISAs (lose tax-free status on death but still part of estate)
• Premium Bonds (contact NS&I)
• Post Office accounts
• Credit union accounts

Cash Found at Home

You must declare any cash found in the deceased's home. HMRC are aware that people keep cash at home. Be honest - estimates are acceptable if exact amount unknown.

Joint Bank Accounts

Treatment depends on who funded the account:

• Joint with spouse: Usually assume 50/50 ownership, include 50% in estate
• Joint with child/other: HMRC presumes deceased owned 100% unless evidence shows otherwise
• Prove joint funding with bank statements if challenging HMRC

Valuing Investments

Shares and Investment Accounts

For shares listed on stock exchanges, use the "quarter-up" rule:

1. Find the closing prices on date of death
2. Take the lower of:
   • (a) The mid-price between the buy and sell prices, OR
   • (b) The lowest selling price, plus one-quarter of the difference between lowest selling and highest buying price

Easier option: Contact investment platforms (Hargreaves Lansdown, AJ Bell, etc.) and request probate valuation service (typically £50-150 fee).

Unit Trusts, OEICs, Investment Bonds

• Contact provider for date of death valuation
• Use the bid price (selling price) on date of death

Pensions

Defined Contribution Pensions (pot of money):

• Contact pension provider for value at death
• Usually paid directly to beneficiaries outside the estate
• If deceased under 75: usually no IHT (paid tax-free to beneficiaries)
• If deceased over 75: beneficiaries may pay income tax

Defined Benefit Pensions (final salary):

• Usually no capital value (payments die with deceased)
• Check for death-in-service lump sum (may be outside estate)
• Spouse pension continues but has no estate value

Life Insurance Policies

Written in trust: Paid directly to beneficiaries, NOT part of estate (no IHT)

NOT in trust: Payout is part of estate, include full payout amount in valuation

Valuing Personal Belongings

Household Contents

Furniture, appliances, clothing, kitchenware, etc.:

• Value = what items would fetch second-hand, not replacement cost
• Typically £100-£1,500 for average household (HMRC accepts reasonable estimates)
• Think car boot sale prices, not retail

Vehicles

• Use valuation guides: Auto Trader, Parkers, Glass's Guide
• Use private sale value (not dealer price)
• Consider condition, mileage, age

Jewelry

• Items over £500: Get professional jewelry valuation (£50-200)
• Probate valuation is LOWER than insurance valuation (resale vs replacement)
• Items under £500: Reasonable estimate acceptable

Antiques, Art, Collectibles

• If potentially valuable (£500+): Get professional valuation from auctioneer or specialist dealer
• Provide photos and documentation to valuer
• Lower value items: Reasonable estimate

Deducting Debts

You can deduct legitimate debts owed by the deceased at death from the gross estate value:

Deductible Debts

• Mortgage: Get redemption statement from lender
• Loans and credit cards: Balance at date of death
• Overdrafts: Amount overdrawn
• Utility bills: Request final bills
• Council tax: Amount owed
• Income tax: Outstanding tax (HMRC will calculate)
• Funeral expenses: Reasonable funeral costs deductible

Evidence Required

For each debt, you need:

• Statement or letter showing debt existed at death
• Confirmation of amount owed
• Proof debt is legally enforceable

Debts to Family Members

HMRC scrutinizes informal family loans. To claim as deductible debt, you need:

• Written loan agreement
• Evidence money was actually lent (bank transfers)
• Repayment history (if any)

What's NOT Deductible

• Debts forgiven in the will
• Debts arising after death
• Informal promises without legal obligation

IHT Forms: IHT205 vs IHT400

Which Inheritance Tax form you use depends on the estate size and complexity:

Residence Nil Rate Band (RNRB)

Additional £175,000 allowance (2024/25) if:

• Deceased owned home
• Home passed to children or grandchildren
• Estate under £2 million

This means you can use IHT205 for estates up to £500,000 (£325K + £175K RNRB).

Transferable Allowances

If deceased had pre-deceased spouse/civil partner:

• Can claim unused portion of their nil rate band
• Maximum total: £650,000 (double £325K)
• With RNRB: Up to £1,000,000 total allowance

Submitting the Valuation to HMRC

What to Submit

• Completed IHT205 or IHT400 form
• All supporting valuations (property, investments, etc.)
• Bank letters confirming balances
• Evidence of debts

Submission Methods

• Online: Via HMRC Inheritance Tax online service (faster)
• Post: Send to HMRC Inheritance Tax (address on form)

Processing Times

• IHT205 (excepted estate): 2-4 weeks typically
• IHT400 (full estate): 6-12 weeks or longer

Paying Inheritance Tax

If IHT is due:

• Due 6 months after end of month of death
• Interest charged if late
• Must be paid BEFORE probate grant issued
• Can pay from deceased's bank accounts (banks may release funds for IHT)

Common Mistakes to Avoid

Record Keeping

Keep all valuation records for at least 20 years (HMRC can query up to 20 years later):

• Property valuations (estate agent letters, surveyor reports)
• Bank statements and date of death letters
• Investment platform valuations
• Receipts from professional valuers
• Debt statements and redemption statements
• Completed IHT forms
• All correspondence with HMRC
• Spreadsheet showing how you calculated values

When to Get Professional Help

Consider hiring a probate solicitor or accountant if:

• Estate value over £500,000
• Complex assets (business, foreign property, trusts)
• Large gifts made in last 7 years
• Disputes between beneficiaries
• HMRC has queried your valuation
• You're uncertain about any aspect

Professional fees are deductible from the estate. Typical costs: £1,500-5,000 depending on complexity.