For Inheritance Tax, a house or other property goes into the estate at its open market value on the date of death: the price it might reasonably be expected to fetch if sold on the open market at that time. HMRC usually asks the Valuation Office Agency to check the figure for estates that pay tax, and a share of jointly owned property is normally discounted, except where the other owner is the deceased’s spouse or civil partner.

What does open market value actually mean?

The test comes from section 160 of the Inheritance Tax Act 1984. HMRC’s manual at IHTM09704 describes the hypothetical sale it assumes: not sudden or forced, between a willing seller who is neither rushing nor reluctant, and a willing buyer who is prudent, has the money and is not desperate to buy. Several practical points follow.

  • The date is the date of death. A later rise or fall in the market does not change the figure, although a sale soon after death can be good evidence of it.
  • Selling costs are not deducted. IHTM09703 confirms that estate agents’ fees and other costs of a sale are not reflected in open market value.
  • No discount for size. Section 160 says the price is not assumed to fall because the whole of the property is put on the market at once.
  • Special buyers count. If a neighbour or tenant would pay more than anyone else, IHTM09704 says that interest is taken into account, though the value will be below what that buyer would actually pay.
  • Development potential counts. In checking undervaluations, HMRC asks whether a valuation properly reflected development potential and any hope value (IHTM36154).

Who should value the property?

For an estate that needs a full account, details of houses, buildings and other real property go on form IHT405 with the IHT400. GOV.UK asks executors to attach a copy of any professional valuation they have. The law does not require a particular kind of valuer, but HMRC judges the executors’ care by what they did. When it looks into a low figure, IHTM36153 says it will want to know:

  • what instructions were given to the valuer, and whether the valuer was asked for an open market value;
  • whether the valuer was given all the relevant information about the property;
  • whether more than one valuer was consulted, and what each said;
  • when the decision to sell was taken and how the asking price was set.

An estate agent’s marketing appraisal, pitched to win an instruction or to sell quickly, is not the same as a reasoned valuation for tax. Estimated figures should be used only where all reasonable efforts to find the correct value have been made (IHTM09035).

How does HMRC check a property value?

For property in the United Kingdom, HMRC relies on professional advice from the Valuation Office Agency, or its Northern Ireland counterpart (IHTM23002). Most UK real property in estates that pay tax is referred, although not every case needs a referral. The district valuer may agree the figure as returned, propose a higher one, or negotiate.

Once the figure is agreed, or HMRC accepts tax on the value offered, it becomes “ascertained” (IHTM09242). An ascertained value also fixes the beneficiaries’ and executors’ base cost for Capital Gains Tax, which is why a low figure that saves Inheritance Tax today can mean a larger gain later; see the CGT uplift on death.

If agreement cannot be reached, executors can appeal against HMRC’s determination. Section 222(4) and (4B) send a dispute about the value of property in England or Wales to the Upper Tribunal, with separate tribunals for Scotland and Northern Ireland.

What if the property sells soon after the death?

HMRC accepts at IHTM09704 that an actual sale within a reasonable time of the death can be used as the open market value. Its guidance at IHTM23185 says that where the account shows a sale, and the executors are willing to adopt the gross sale price, a referral to the Valuation Office Agency can be dispensed with, provided the sale was for full value and not to a connected person.

The sale can cut both ways. If offers above the probate figure were received before the account was signed, HMRC expects that market evidence to be reflected (IHTM36154). If the sale price is lower, the executors may be able to claim loss on sale relief rather than argue that the original value was wrong.

How is a share of jointly owned property valued?

GOV.UK sets out a simple approach for estimating the value of joint property:

Situation GOV.UK approach
Joint tenants with a spouse or civil partner Divide the value by 2
Joint tenants with others (friends, siblings) Divide by the number of owners, then take 10% off the deceased’s share
Joint owners in Scotland (not spouses) Take £4,000 off the value of the whole, then divide by the number of owners
Tenants in common Value the deceased’s actual share

The discount reflects the fact that a buyer of a share in a house would be buying into a property with someone else, with limited control. HMRC’s manual at IHTM15072 says that in England, Wales and Northern Ireland the district valuer reports the value of the share having already allowed for this, so no further discount should be added. Joint bank accounts get no discount. The difference between the two forms of ownership is explained in joint tenants vs tenants in common.

Why is there no discount between spouses?

The related property rule in section 161 values the deceased’s share as a proportion of the combined holding where the spouse or civil partner owns the rest. IHTM09739 explains that a married couple’s interests are together worth more than the sum of two discounted halves, so the deceased’s half is valued as half of the whole, without a joint ownership discount. The rule does not bite where the share passes to the spouse as surviving joint tenant, because the spouse exemption applies anyway. It is most relevant where a spouse leaves a half share to children under a will.

A similar point arises where the deceased owned two shares of the same property, for example their own half and a life interest in a trust holding the other half. IHTM23183 tells HMRC officers to have the whole valued and split, rather than discounting each half.

What does this look like in figures?

Illustration only. A house is worth £400,000 at the date of death and the deceased owned half.

  • Owned with a sibling as joint tenants: half is £200,000, less 10% under the GOV.UK approach, giving £180,000.
  • Owned with a spouse as tenants in common, with the half left to the children: related property applies, so the share is half of £400,000, giving £200,000 with no discount.

At a 40% rate the difference in tax on that one asset would be £8,000.

What happens if the value turns out to be too low?

An undervaluation means more tax and interest. HMRC can also seek a penalty for an incorrect account (IHTM36010). Its manual says investigators should start from the assumption that executors acted carefully, and should ask whether it was reasonable to rely on a professional valuation, whether the valuer had all the facts, and whether the executors questioned advice that obviously ignored relevant information (IHTM36002, IHTM36154).

What mistakes come up most often?

  • Using a quick agent’s appraisal or online estimate for a taxpaying estate.
  • Deducting selling costs from the date of death value.
  • Claiming a joint ownership discount on a share owned with a spouse or civil partner.
  • Applying a discount on top of a district valuer’s figure that already includes one.
  • Ignoring offers received before the IHT400 was signed.
  • Forgetting that a deliberately low figure also lowers the base cost for a later sale.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.