Valuing an estate is the step that everything else in probate depends on. The figure you arrive at decides whether inheritance tax is due, which forms you have to complete, and whether the estate qualifies for the simpler reporting route. Get it wrong and you risk penalties on one side or an overpayment on the other, which is why careful families often look early at how to protect your estate from inheritance tax rather than after the numbers have already gone to HMRC.
The principle is simple enough: you add up everything the person owned, subtract what they owed, and the result is the value of the estate. The detail is where it gets fiddly, because every asset has to be valued as at the exact date of death, and a surprising number of things are easy to overlook. GOV.UK’s guidance on valuing an estate is the authoritative starting point, and the steps below follow the same logic in plain terms.
Start with a complete inventory
Before you value anything, list everything. Property and land come first, then bank and building society accounts, National Savings, premium bonds, shares and investments, life insurance that pays into the estate, vehicles, and personal possessions of real value such as jewellery, art or collections. Add any money owed to the deceased, including a final salary payment, a tax refund, or a loan they made to someone.
Working from a full list, rather than the obvious assets only, is what prevents the awkward situation of discovering a forgotten share holding or a second account months later, after figures have already been submitted.
Use date-of-death values, not today’s
Every asset is valued as at the day the person died. For bank accounts, that means asking each institution for the exact balance on that date, including any interest accrued up to it. For shares, you use the market value on the date of death, not what they are worth now.
Property usually needs a proper valuation rather than a rough guess. For a modest estate an estate agent’s written valuation may be enough, but where inheritance tax is in play, a formal valuation from a RICS surveyor is safer, because HMRC can challenge a figure it considers too low. An undervalued home is one of the most common reasons an estate is later reopened.
Subtract what the estate owes
An estate’s value is what is left after debts. Deduct the outstanding mortgage, any loans or credit card balances, unpaid utility and council tax bills, and reasonable funeral costs. These reduce the taxable value, so missing them can mean the estate looks larger, and more taxable, than it really is.
Keep evidence of every debt and every funeral expense. If inheritance tax is due, HMRC will expect the deductions to be supported, and good records here make the whole account easier to defend.
Don’t forget gifts from the last seven years
This is the part people most often miss. Gifts the deceased made in the seven years before death can be pulled back into the estate for inheritance tax purposes under the seven-year rule. A large cash gift to a child, or helping a grandchild with a house deposit, may still count toward the taxable estate depending on when it was made and how much it was.
Smaller exempt gifts, such as the annual allowance and normal gifts out of income, sit outside this, but the larger ones need to be identified and reported. Reconstructing several years of gifts is tedious, yet skipping it can leave the estate underreported and the executor exposed.
Reporting the value and paying on time
Once you have a total, the value decides your route. Many estates now qualify as “excepted estates,” where you declare the value as part of the probate application rather than completing a full tax account. The old IHT205 form was abolished for deaths from 1 January 2022. Where inheritance tax is actually due, or the estate does not meet the excepted conditions, you complete the fuller IHT400 account with its supporting schedules.
Timing matters as much as accuracy. Inheritance tax is due by the end of the sixth month after the person died, and HMRC charges interest on anything paid after that point, even if probate has not yet been granted. The GOV.UK guidance on paying inheritance tax explains the deadline and the instalment options for assets like property. The most reliable way through all of this is to slow down at the start. Build the full inventory, pin every asset to its date-of-death value, capture the debts and the gifts, and only then decide which reporting route applies. A valuation done carefully once is far cheaper than a tax account that has to be corrected later, and it gives the family a clear, defensible figure to work from for the rest of the estate.