Valuing private company shares for inheritance tax

Shares in a private company are valued on death at the price they might reasonably fetch in a hypothetical open market sale, assuming the buyer has all the information a prudent buyer would want. The size of the holding, including any related property of a spouse, drives the price per share, so minority holdings are usually worth much less than their pro rata share of the company. HMRC’s Shares and Assets Valuation team checks these values.

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What is the legal test for the value?

Section 160 of the Inheritance Tax Act 1984 (IHTA 1984) sets the general rule: property is valued at the price it might reasonably be expected to fetch if sold in the open market at the time, with no reduction because the whole holding is assumed to be sold at once. Section 168 adds a rule for unquoted shares. It assumes that a prospective buyer has all the information a prudent buyer might reasonably require if buying from a willing seller by private treaty at arm’s length. In Couch v Caton the tribunal accepted that a prudent buyer of a sizeable holding could ask for management accounts and budget forecasts, not just the published accounts (SVM113130).

Because there is rarely a real market, the courts have filled in the detail. HMRC’s Shares and Assets Valuation Manual quotes IRC v Gray, where the hypothetical seller and buyer are taken to act as reasonable people would in real life, and the buyer reflects whatever demand actually existed at the date. Restrictions in the articles do not prevent a valuation. Following Attorney General for Ireland v Jameson and Re Crossman, the buyer is treated as stepping into the shareholder’s shoes, subject to the pre emption rights and transfer restrictions in the articles (SVM113040). The shares cannot be worth as much as freely tradeable shares, and a “fair value” clause in the articles does not necessarily fix the tax value, a point covered in our page on fair value clauses.

Which shares count as unquoted?

IHTM18131 explains that shares are unquoted if the company is not listed on a market that meets HMRC’s definition of listed, or is not listed anywhere. That includes family companies, shares on a submarket such as the Alternative Investment Market (AIM), and shares on a foreign exchange that is not a recognised stock exchange. Since 6 April 2026 the IHTA 1984 itself uses the income tax meaning of recognised stock exchange. Unquoted shares and control holdings of listed shares go on schedule IHT412, not IHT411.

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Who at HMRC values the shares?

Shares and Assets Valuation (SAV) is the HMRC team mainly responsible for valuing shares in companies with no listing on a recognised exchange (SVM101010). The IHT400 notes say HMRC will usually ask SAV to consider the value of unlisted shares. On a death referral, SAV is told about shares held by the spouse or civil partner, exempt shares and shares in trusts in which the deceased had an interest in possession, because all of these can affect the size of the holding being valued (SVM108040). It also looks at sums due to or from the company, such as loan accounts and unpaid dividends.

The IHT400 notes warn executors not to enter the nominal value of private company shares unless that genuinely reflects market value, and suggest the company secretary or accountant may help. In practice a value should be supported by the company’s accounts, the shareholdings and the articles, using an appropriate method from those described in our page on business valuation methods.

Why are minority holdings worth less per share?

A buyer of a small holding usually cannot appoint directors, set dividends or force a sale, so pays less per share than a buyer of control. HMRC’s Capital Gains Manual at CG59562 puts it plainly: if the value per share for a 75% holding is £100, the value per share for a 10% holding in the same company may only be £20. The figure depends on the holding as a whole, not just the shares in question.

SVM113130 lists decided cases to show the range. In Couch v Caton, a 14.2% holding was valued at the estimated company value discounted by 50%. In Clark v Green, a 3.16% holding in the same company took a 70% discount to the comparable quoted price earnings ratio. In Marks v Sherred, a 66% holding was given no discount for size. HMRC stresses that each case turns on its facts and that these are not rules of thumb.

How do the related property rules change the value?

Under section 161, shares held by a spouse or civil partner are related property. You value the combined holding, then attribute to the deceased a proportion of that combined value. IHTM09732 gives the example of T, who owns 40 of 100 shares while T’s spouse owns 30. Alone, T’s holding is worth £8,000. The combined 70 shares are worth £28,000, so T’s holding is valued at four sevenths of that, £16,000. Property given to a charity by an exempt transfer can also be related property for five years (IHTM09733). The related property rules page covers the apportionment in detail.

If the personal representatives later sell the deceased’s shares on their own within three years of death, section 176 can allow a revaluation without the related property uplift, provided the conditions are met, including an arm’s length sale (SVM108320).

Worked example: a husband and wife company

Illustration only. Priya owns 30 of the 100 shares in a trading company and her husband owns 30. A buyer of Priya’s 30% alone would pay, say, £150,000. A buyer of the combined 60% would pay £720,000 because it carries control.

Step	Amount
Value of combined 60% holding	£720,000
Priya’s proportion, 30 of 60 shares	One half
Value of Priya’s shares for inheritance tax	£360,000

If Priya’s shares pass to her husband, the spouse exemption covers them. If they go to her children, the value of £360,000, not £150,000, is the starting point before any relief.

How does business relief fit in, and does the value still count?

For deaths from 6 April 2026, HMRC’s guidance says business relief at 100% applies to qualifying unquoted shares only up to an allowance of £2.5 million, shared with agricultural relief and transferable to a surviving spouse or civil partner, with relief at 50% above it (SVM108070, IHTM18131). Shares on AIM and on foreign exchanges that are not recognised exchanges now qualify only for 50%. So a precise value is needed far more often than before. Relief also does not cover a director’s loan account, undrawn pay or unpaid dividends owed by the company to the deceased (SVM108070). Tax on qualifying shares can usually be paid by instalments.

The value agreed for inheritance tax becomes the beneficiaries’ base cost for capital gains tax only once it has been “ascertained”. IHTM09241 says that requires some formality or agreement, and a simple claim is not enough.

What mistakes come up most often?

Using nominal value, or net assets divided by the number of shares, for a minority holding.
Ignoring the spouse’s shares, shares in a life interest trust, or exempt shares when sizing the holding.
Relying on a figure agreed for another shareholder or another date. CG59562 warns that a value per share depends on the holding being valued.
Forgetting the loan account, which is a separate asset and does not attract business relief.
Assuming 100% relief means no valuation is needed for deaths after 5 April 2026.

Listed holdings are valued differently, as set out in our page on valuing listed shares for probate.

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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.