If HMRC agrees a higher value, additional Inheritance Tax and late-payment interest may be due, and penalties can apply where reasonable care was not taken. Executors may also face personal exposure in some circumstances, so a properly considered valuation is important.
Key Takeaways
Why is HMRC Checking More Valuations?
HMRC hasn't given an official reason for the reported rise. What we do know is that Inheritance Tax receipts keep climbing: provisional receipts hit £8.5 billion in 2025/26, the highest in HMRC's published 20-year run. HMRC puts the broader growth down partly to rising asset values and frozen thresholds. Residential property makes up a large share of many estates, particularly those under £1 million, so it's a natural focus for checking.
When reviewing a value, HMRC and Valuation Office specialists can look at the professional valuation, any offers received, what the property later sold for, and conditions in the local market. Since, 1 April 2026 the Valuation Office Agency was brought directly into HMRC though it was already an HMRC executive agency, and the government said its core valuation services would continue unchanged.
Two points for review before this goes client-facing: the £8.5 billion 2025/26 receipts figure and the 1 April 2026 VOA-into-HMRC change should both be verified against current HMRC sources, as these are recent and I can't confirm them from memory. The IHT framing is also worth a partner's eye given the escalation rules on IHT matters.
How Does HMRC Value a Property for Inheritance Tax?
HMRC looks at what the property could reasonably have sold for on the open market at the date of death. The figure should reflect a normal sale between a willing buyer and a willing seller. A rushed sale, a private deal within the family, or a number chosen to reduce the tax bill won't stand up.
Once the IHT400 is filed, HMRC can do one of three things: accept your valuation, ask for more evidence, or propose a different figure. HMRC says that if it hasn't been in touch within 14 weeks, it won't carry out further checks. Even so, executors should keep clear records and report anything significant that changes.
What Happens If You Get the Properyt Valuation Wrong?
A different valuation doesn't automatically mean a penalty. But if HMRC agrees a higher figure and that lifts the taxable estate, more Inheritance Tax may fall due, usually at 40%, along with late-payment interest, currently 7.75%, running from the payment deadline.
What matters is whether the executor took reasonable care. Take reasonable care and there's normally no penalty. Get careless and it can cost up to 30% of the potential lost revenue; a deliberate error, up to 70%; a deliberate and concealed one, up to 100%. A properly instructed professional valuation is strong evidence that care was taken, but it won't get you off automatically.
Executors can also be on the hook personally in some situations, especially if they hand out estate assets without keeping enough back to settle the tax.
Worked Example: What an Undervaluation Could Cost
Header | Original figure | Agreed figure |
|---|---|---|
Property value | £560,000 | £620,000 |
Additional taxable value | - | £60,000 |
Additional IHT at 40% | - | £24,000 |
Illustrative interest for one year at 7.75% | - | £1,860 |
Illustrative careless-error penalty at 15% | - | £3,600 |
Total additional cost | - | £29,460 |
On these assumptions, that's £24,000 in extra tax and roughly £5,460 in interest and penalties on top. The real figure will move with the estate's available thresholds and reliefs, how long the tax goes unpaid, the interest rates running over that time, and whether HMRC accepts that reasonable care was taken.
These figures are illustrative, and the real position depends on the facts of the estate.
Do you Need a RICS Valuation, or Will an Estate Agent do?
You do not always need a formal valuation from a Royal Institution of Chartered Surveyors (RICS) professional. HMRC accepts an estate agent’s valuation as evidence and suggests obtaining one or more professional opinions when a property’s value is not obvious. Whichever option you use, get the valuation in writing, make sure it reflects the property’s value on the date of death, and check that it explains how the figure was reached.
If the property is simple and the estate is clearly below the tax thresholds, an estate agent's valuation is usually fine. It's different if Inheritance Tax is likely to be due, or the property is unusual, expensive, jointly owned or has building potential. In those cases, it's worth paying for a proper surveyor's valuation. It won't guarantee HMRC agrees, but it's far easier to defend and shows you took care to get it right.
Checklist: Valuing a Property in an Estate
Conclusion
The property valuation is one of the most important figures on an IHT400. HMRC can ask you to back it up with professional valuations, any offers you received, later sale details and local market information. Value it too low and you may owe extra tax and late-payment interest, with penalties on top if you didn't take reasonable care.
A clear, well-supported valuation won't guarantee HMRC agrees, but it makes the figure much easier to defend. It also protects the executors, and that matters most before any estate assets are handed out.
Frequently Asked Questions
Not just by changing the name on the deeds. If you give your son the house but carry on living there rent-free, HMRC treats it as a "gift with reservation", so it still counts as part of your estate. For the gift to actually work, you either survive seven years and stop benefiting from the property, or you stay put and pay full market rent plus your share of the bills.
There's no separate threshold for property. IHT is based on the whole estate. The basic tax-free amount is £325,000. It can rise to £500,000 where a qualifying home passes to children, grandchildren or other direct descendants, though that extra slice tapers away once an estate is worth more than £2 million.
Maybe. It depends on the size of your estate and the allowances you can use. Leaving a qualifying home to children, grandchildren or other direct descendants can add up to £175,000 of allowance. That reduces for estates over £2 million, and the tax is worked out on the whole estate, not the house by itself.
Usually not on what passes to a spouse or civil partner. That's generally exempt. Any unused tax-free threshold passes to the survivor as well, which can give a combined basic threshold of up to £650,000. The unused residence allowance can often transfer too, though special rules apply if the couple have different long-term UK residence status.
There's no single right answer. A clear, valid will is the usual starting point. Leaving a qualifying home to direct descendants can protect the residence allowance, while trusts, lifetime gifts and joint ownership each work differently, both for tax and in law. Take advice before you decide.
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