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Property is the most common source of IHT disputes in probate — and the most common reason HMRC opens a compliance check. Whether you have innocently used an estate agent's low estimate or genuinely struggled to value a complex property, this guide explains what HMRC expects, how they check values, what happens when they query your figure, and how to correct a valuation error. For a broader look at avoiding HMRC investigations, see our guide on how to avoid an HMRC inheritance tax investigation.
The legal standard for valuing property for inheritance tax is "open market value at the date of death". This is defined in section 160 of the Inheritance Tax Act 1984 as the price a willing buyer would pay a willing seller in an arm's-length transaction, with both having reasonable knowledge of the relevant facts.
This is not the price the family would accept in a quick sale, the price the property would fetch if sold in its current condition without any marketing, or the price based on what was paid for it many years ago. It is the full market value as if the property were offered properly on the open market.
Deductions can legitimately be made for genuine factors that would affect value — for example, structural problems, required repairs, or an ongoing tenancy. However, these deductions must be supported by evidence. For guidance on the full valuation process, see our guide to valuing property for probate.
HMRC does not value land itself. Its manual says: “Where land is situated in the United Kingdom we rely on professional advice from the Valuation Office Agency (VOA), or the Valuation and Lands Agency (VLA) in Northern Ireland, in arriving at a valuation.” The VOA covers England, Wales and Scotland, and District Valuer Services is the arm of it that does this work.
This is not an escalation. The IHT400 notes say HMRC “will usually ask the Valuation Office Agency to give us their opinion of the value of the deceased's property. They will take into account the circumstances of any jointly owned property and amount of discount to be allowed. If the Valuation Office Agency can not accept the figures you've used, they will try to agree a value with you. If the agreed value is more than the figure that you've suggested, you may have to pay some more tax (and interest).”
HMRC does not publish the data sources behind its decision to ask a question, so this guide does not list any. Land Registry price paid data is the public record of what comparable properties actually sold for, and is available to you as well as to HMRC at gov.uk/search-house-prices.
You are not required to accept the VOA figure. If you believe it is too high, you can provide evidence to support your original value or commission your own valuer's report.
No official source publishes a tolerance — a percentage by which a declared value may differ from HMRC's before it will be challenged. Figures of that kind circulate widely and none of them come from HMRC or the VOA, so this guide will not repeat one.
The deeper problem with a tolerance is what it invites: a margin to value within. The rule points the other way. The figure has to be the open market value at the date of death, and HMRC's notes add a duty to revisit it — if before applying for the grant you learn something that casts doubt on the valuation, “you must reconsider it”. The example HMRC gives is marketing at £270,000 a property you valued at £250,000 and receiving offers at the higher figure.
Some properties are genuinely harder to value than others — a rural property, a mixed-use building, one with unusual features. Where several valuations give a range, HMRC's notes say it is “probably best to adopt a value that's somewhere in between the highest and lowest values that you've got”.
If HMRC decides to query your property valuation, the typical sequence is:
For guidance on how to respond to HMRC, see our guide on how to respond to an HMRC probate query and our guide specifically on HMRC querying a property valuation.
The DVS negotiation process is a formal but not adversarial one. Both sides are trying to reach an accurate figure, not to score points. The most effective approach is to:
HMRC's notes describe the intended outcome as an agreed value. Where no agreement is reached, the dispute goes to the First-tier Tribunal (Tax Chamber) for determination.
If the property value is revised upward — either by agreement with HMRC or following a DVS review — additional IHT will be calculated on the difference between the revised value and your original declaration, at 40% (above the nil-rate band).
| Scenario | Additional IHT |
|---|---|
| Property revised up by £50,000; estate already above NRB | £20,000 (40% of £50,000) |
| Property revised up by £50,000; £30,000 already above NRB | £12,000 (40% of the £30,000 above the NRB threshold) |
| Property revised up by £50,000; estate still below NRB | £0 |
Interest runs on the additional tax from the first day of the seventh month after the month in which the person died. The rate is the Bank of England base rate plus 4 percentage points, and has been 7.75% since 9 January 2026 — check HMRC's rates page, because it changes with the base rate. As an illustration only, at that rate 18 months of interest on £20,000 of additional IHT would be around £2,325.
For more on IHT interest and how it accrues, see our guide to probate delays and IHT interest.
Whether the revision arises from a voluntary correction or following an HMRC query, any change to the estate value after the IHT400 has been submitted is recorded via a C4 corrective account. If the correction results in a higher value (and more IHT), you complete the C4, HMRC issues a revised computation, and you pay the balance plus interest. If the correction results in a lower value (see below), HMRC will arrange a repayment.
Overvaluation is less common than undervaluation but it does happen — particularly where the executor uses a higher than necessary professional valuation in an attempt to be conservative, or where a property sells for less after probate is granted.
Where land or buildings from the estate are sold at a loss, form IHT38 lets you claim relief. GOV.UK sets the condition on the sale: it must be “within 4 years of the date of death, or 3 years if the death was on or before 15 March 1990”. The claim is made by the person “liable for the Inheritance Tax on the value of the land or buildings which were part of the deceased's estate”. If it succeeds, the sale price is substituted for the date-of-death value, reducing the IHT.
Penalties apply to IHT errors, not to genuine valuation differences. If your property value was simply lower than HMRC's assessment, and you made a reasonable good-faith effort to establish market value, HMRC should not apply penalties — the difference in value is resolved through the DVS negotiation process.
Penalties become relevant where:
For executors who commissioned proper professional valuations and acted in good faith, penalties are not applied even when the DVS disagrees with the declared figure. See our guide on the consequences of mistakes on a probate application.
The most effective way to avoid a property dispute with HMRC is to invest in the right evidence at the outset:
No. You have the right to challenge the DVS figure by providing evidence to support your own valuation. A written report from an RICS Registered Valuer, prepared to the date-of-death open market value standard, is the most substantial evidence you can put in. HMRC's notes say the VOA “will try to agree a value with you”; if no value can be agreed, the tribunal decides.
Yes — provided the sale completed within 4 years of the date of death and was an arm's-length transaction with an unconnected buyer. Use form IHT38 or a C4 corrective account to claim substitution of the sale price for the IHT value. HMRC will repay the excess IHT paid plus interest on the repayment.
HMRC does not prescribe who must provide the valuation. Its notes say you are “strongly advised to use a professional valuer” for land and buildings, and IHT405 asks you to enclose a copy of any professional valuation you have — which suggests a written report is the stronger evidence if the figure is later discussed with the VOA. What matters either way is that the letter or report states the open market value at the date of death and how it was arrived at.
Section 240 of the Inheritance Tax Act 1984 sets three limits, running from the later of the date the tax was paid or the date it became due: four years normally, six years where the loss of tax was brought about carelessly, and twenty years where it was brought about deliberately. Careless is six, not four. No official source publishes when queries typically arise in practice.
Yes — condition is a legitimate factor in establishing market value. The key is to document the condition thoroughly (photographs, survey, builder's quotes) and ensure the valuer's letter or report explicitly references the condition and explains the impact on value. HMRC will accept condition-based reductions if they are properly evidenced.