You need an estimate of the estate’s value (the deceased’s money, property and possessions), to find out if there’s Inheritance Tax to pay.
There’s normally no Inheritance Tax to pay if either:
- the value of the estate is below the £325,000 threshold
- you leave everything above the £325,000 threshold to your spouse, civil partner, a charity or a community amateur sports club
If the person who died was widowed or is giving away their home to their children, the tax threshold can be higher.
Working out your estimate
You need to estimate the total value of the estate. This includes:
- the value of the things the person owned (their assets) on the day they died
- any gifts they made, such as cash or items of value, in the 7 years before they died
- the value of any trusts where the person had a beneficial interest
At this stage, your estimate only needs to be accurate enough for you to know if the estate owes tax. You’ll need accurate valuations if the estate owes any tax.
You can work out the estimate yourself or you can use the Inheritance Tax checker.
Use the online Inheritance Tax checker
The checker will:
- give you an approximate value of the estate
- help you decide whether any Inheritance Tax is likely to be due or not
The checker does not:
- calculate the amount of Inheritance Tax that’s owed
- tell HMRC about the estate’s final value
Before you start
You’ll need the following information to estimate the estate’s value:
- details of the person’s assets, including joint assets
- details of any gifts they made
Valuing the assets
Start by listing the person’s assets - the things the person owned with a monetary value.
These may include:
- their home
- any other properties, buildings or land
- money in banks, building societies or ISAs or cash in their home
- stocks and shares
- household and personal items, including furniture, paintings and jewellery
- cars, caravans or boats
- foreign assets, such as property abroad
- money they’re owed, for example wages or refunds from household bills
- payments when they died, for example life insurance or a lump sum ‘death benefit’ from a pension
Then estimate the value of each on the date the person died.
Include all assets in your estimate. This includes any left to the person’s spouse, civil partner or a charity - you will not pay tax on these assets.
For items such as jewellery, paintings or other household goods, work out how much you would have got if you’d sold them on the open market. You can use online marketplaces to help work out their value.
Valuing joint assets
You need to find out what assets the person owned with someone else and how they were owned.
The rules for valuing joint assets, such as property, jewellery or paintings, are different depending on whether they were owned as:
- ‘joint tenants’ (known as ‘joint owners’ in Scotland)
- ‘tenants in common’ (known as ‘common owners’ in Scotland)
Joint tenants
Joint tenants automatically pass on any assets, such as land or property, to the other owners if one of them dies.
If the asset, such as land or property, was owned as a joint tenant with the person’s spouse or civil partner, divide the value of the asset by 2.
If land or property was owned with other joint tenants, for example friends or siblings, do both of the following:
- divide the value by the number of owners
- take 10% from the share of the person who died
Example
The deceased owned a property as a joint tenant with 3 other people. The property is worth £200,000 on the date they died, giving them a £50,000 share (£200,000 divided by 4).
After 10% (£5,000) is deducted from the deceased’s £50,000 share, the final value is £45,000 (£50,000 - £5,000 = £45,000).
In Scotland, if land or property was owned jointly with others (excluding a spouse or civil partner), take £4,000 off the value of the whole asset before working out the deceased’s share.
Example
The deceased owned a property in Scotland as a joint owner with 3 other people. The property is worth £200,000 on the date they died.
After £4,000 is taken away from the total value of the property, this leaves £196,000 (£200,000 - £4,000).
When divided by the number of owners, the deceased’s share of the property is £49,000 (£196,000 divided by 4).
To value a joint bank account, divide the amount by the number of account holders, unless it’s in joint names for convenience only. For example, an older person may add their child to help them with the account. If so, use the amount the deceased actually owned instead.
Tenants in common
The rules are different for tenants in common as they do not automatically pass on any assets they jointly own.
If the deceased jointly owned property or land as a tenant in common, work out the value based on their share.
Working out the value of any gifts
You need to work out the value of any gifts made by the person who died.
Gifts only count towards the value of an estate if they were made in the 7 years before the person died and the total value of the gifts was over the £3,000 annual exemption.
If a person lives for 7 years after making a gift, there’s no Inheritance Tax to pay.
Any gift a person continued to benefit from before they died also counts towards the value of an estate - for example, if they gave away a house but lived in it rent-free (known as a ‘gift with reservation’).
There’s no Inheritance Tax to pay on gifts to charities or political parties.
What counts as a gift
A gift can include:
- money
- household and personal goods, for example, furniture, jewellery or antiques
- a house, land or buildings
- stocks and shares listed on the London Stock Exchange
- unlisted shares held for less than 2 years before the person’s death
Checking for gifts
You can check for gifts by:
- going through bank statements
- talking to family members
- looking through financial documents
Record the value of any gift and the date it was made.
Estimate the gift’s value
To estimate the value of each gift, use either:
- the approximate value of the gift at the time it was made (realistic selling price)
- the realistic selling price of the gift if the deceased continued to benefit from the gift after giving it away (a ‘gift with reservation’)
Debts
Do not include the estate’s debts when you estimate the gross value. You will however need to tell HM Revenue and Customs (HMRC) about any debts when you report the value of the estate.
Check for records of debts when the person died, for example:
- their mortgage, loans, credit cards or overdrafts
- ‘liabilities’ like household bills or bills for goods or services they’d received but not yet paid for (like building work, decorators, accountants)
What to do next
Check if you need to send full details of the estate’s value.
