HMRC accepts that a share of a jointly owned house is usually worth less than the same fraction of the whole, because a buyer of a share would be buying into a property with someone else. The discount is available where the other owners are, for example, siblings, children or an unmarried partner, but it is switched off between spouses and civil partners by the related property rule in section 161 of the Inheritance Tax Act 1984, which values the deceased’s share as a proportion of the whole.

The basic figures (10% as a starting point in England, Wales and Northern Ireland, and £4,000 off the whole in Scotland) are set out in valuing property for inheritance tax and probate. This page looks at the rules behind the discount: when it is given, when it is lost, and the relief that can restore it after a sale.

Why is a share worth less than its arithmetic fraction?

Section 160 of the 1984 Act values property at the price it might reasonably fetch on the open market. When the deceased owned only part of a house, the thing being valued is that part, not the whole. A hypothetical buyer of a half share cannot move in and cannot sell without the other owner’s cooperation, so would pay less than half the vacant possession value.

HMRC’s IHT400 notes treat the size of the discount differently in each legal system:

  • English law: executors may reduce the arithmetical share by 10% as a starting point. The notes stress that this is only an indication; both the discount and the value of the whole may be changed after the grant.
  • Scottish law: a joint owner can raise an action for division and sale, so the discount reflects the cost and delay of that action. Because that cost is not related to the property’s value, the starting point is a fixed £4,000 deducted from the whole before the share is calculated.

In England, Wales and Northern Ireland, the District Valuer reports the value of the share having already allowed for joint ownership, and HMRC’s manual at IHTM15072 tells officers not to accept any further discount on top.

Who gets the discount?

The discount is available on a share of a house or other property owned with anyone other than a spouse or civil partner: a brother or sister, a parent or child, an unmarried partner or a friend. The IHT400 notes apply it to a share of a house generally, so it applies whether the owners were joint tenants or tenants in common. The form of ownership changes who inherits, not whether the share is discounted; see joint tenants vs tenants in common.

It is not available on money. GOV.UK says a joint bank account is divided by the number of holders, unless it was in joint names for convenience only, in which case the deceased’s actual ownership is used. HMRC also does not give a discount automatically for jointly owned chattels such as furniture or art (see valuing household and personal goods); it looks at how and why the joint ownership arose before deciding (IHTM21043).

Why does it not apply between spouses or civil partners?

Section 161 says that where property in the deceased’s estate would be worth less on its own than its “appropriate portion” of the combined value of that property and any related property, the appropriate portion is used. Property in the estate of the deceased’s spouse or civil partner is related property.

HMRC’s manual at IHTM09739 explains the effect on a jointly owned home. Each spouse’s interest would normally attract a discount, but together the two interests make up the whole house and are worth more than two discounted halves. So the deceased’s half is valued as half of the undiscounted whole, with vacant possession if the couple lived there. The IHT400 notes say plainly that no discount should be applied where the other joint owner is the spouse or civil partner, under either English or Scottish law.

The rule usually costs nothing when the share passes to the surviving spouse, because spouse exemption applies anyway. It costs tax when the deceased’s share goes elsewhere, for example a half share left by will to children or into a trust. The same principle applies to property owned by a married couple and let to a partnership in which they were the only partners, where 100% business relief is not available.

When else is the discount lost?

  • Two shares in one estate. A person’s estate is the aggregate of everything they are beneficially entitled to. If the deceased owned half a house outright and had a life interest in a trust holding the other half, HMRC values the whole and splits it, rather than discounting each half (IHTM15071 and IHTM23183). This applies even if one of the shares is exempt.
  • A whole property left in parts. Where the deceased owned the whole property and left part to an exempt beneficiary and part to a chargeable one, the entirety is valued (IHTM23183).
  • Property given to a charity or similar body. Section 161 also treats as related property anything that is, or within the previous five years was, owned by a charity, a qualifying political party, a registered housing association or certain national bodies, where it got there through an exempt transfer by the deceased or their spouse or civil partner after 15 April 1976. Giving away a half share of a building to a charity does not create a discount on the half that is kept.

Does a sale after the death remove the discount?

No. HMRC’s manual at IHTM23184 deals with a jointly owned house sold under a contract made after the death. The valuation is made at the moment before death, when the property was still jointly owned, and HMRC does not value with hindsight by ignoring that fact. The share is still referred to the Valuation Office Agency, with full details of the sale.

The sale can, however, reduce the discount. The manual tells officers to point out that the joint owners were collectively willing to sell, which removes one source of potential disagreement. Executors should therefore expect a smaller discount than the 10% starting point where the whole property was sold promptly with everyone’s agreement. Where related property applies, there is no discount to argue about and the sale price of the whole can be used in the normal way.

What relief is there if related property is sold for less?

Section 176 gives a relief that can partly undo the related property rule. If property valued under section 161 is sold within three years after the death, the personal representatives or the people who inherited it can claim to have the date of death value recalculated as if the related property rule had not applied. For a share of a house, that means a standalone value for the share, which can include a joint ownership discount.

The conditions are strict (section 176(3) and IHTM09754):

  • the sellers must be the personal representatives or the people in whom the property vested on death;
  • the sale must be at arm’s length for a price freely negotiated at the time;
  • it must not be made in conjunction with a sale of the related property, so a sale of the whole house by the children and the surviving spouse together does not qualify;
  • no seller, or anyone interested in the proceeds, may be connected with the buyer;
  • the sellers must not obtain a right to reacquire the property;
  • the sale price, adjusted for any change in circumstances such as market movement or condition, must be less than the original value.

The relief is not the same as loss on sale relief, which compares the sale price with the probate value; see loss on sale relief after death.

How might the numbers work?

Illustration only. A husband dies owning a half share of a house worth £300,000 with his wife as tenants in common, and leaves his half to his son. Under the related property rule the share is valued at half the whole, £150,000, with no discount. Two years later the son sells his half share to an unconnected investor at arm’s length for £125,000, while his mother keeps her half. The son claims section 176 relief, and the Valuation Office agrees that the half share, valued on its own at the date of death, was worth £135,000. The chargeable value falls from £150,000 to £135,000. At 40%, that saves £6,000 of tax. The figure used is the standalone value at death, not the sale price.

What mistakes come up most often?

  • Claiming a discount on a share owned with a spouse or civil partner.
  • Applying the 10% starting point and then a further discount on the District Valuer’s figure.
  • Discounting each half where the deceased also had a life interest in the other half.
  • Assuming the discount disappears because the whole property was later sold, or expecting the full 10% after an agreed sale.
  • Selling the related half alongside the spouse’s half and then claiming section 176 relief.
  • Claiming a discount on a joint bank account.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.