How to Value an Estate for Inheritance Tax (IHT400 Walkthrough)

Valuing an estate for inheritance tax is one of the first and most important tasks facing an executor or administrator after a death in England or Wales. Before HMRC will accept a probate application, and before any inheritance tax can be paid, the law requires a comprehensive account of every asset and liability belonging to the deceased at the exact date of death. That account is submitted on form IHT400, the main Inheritance Tax Account return, supported by a series of supplementary schedules covering everything from property to foreign assets to lifetime gifts. Getting the valuation right matters: undervalue the estate and HMRC may raise an enquiry, charge interest, and impose a penalty for an inaccurate return; overvalue it and the beneficiaries pay more tax than the law requires.

The process sounds straightforward in principle but is rarely simple in practice. Property must be independently valued by a qualified surveyor. Quoted investments must be valued using a specific Stock Exchange formula. Jointly owned assets must be traced to their beneficial shares. And gifts made in the seven years before death must be identified and brought into the calculation as potentially exempt transfers that may have failed. Executors who are unfamiliar with the rules frequently make errors that cost the estate time and money.

This guide walks through the IHT400 process step by step — what must be included, what can be deducted, which supplementary schedules are relevant, and what happens after you submit. For the broader picture of administering an estate from grant of probate to final distribution, see our guide to the probate process and our overview of probate costs.

What Is the IHT400 and When Do You Need It?

The IHT400 (Inheritance Tax Account) is HMRC’s principal return for reporting and calculating inheritance tax on a deceased person’s estate. Not every estate requires a full IHT400. Smaller, simpler estates that fall within the excepted estate rules may be reported using the shorter online IHT205 declaration (or its successor form under current HMRC guidance). However, a full IHT400 is required when the gross estate exceeds £3 million, when the deceased made significant lifetime gifts in the seven years before death, when there are complex assets such as overseas property, business interests, or agricultural land, or when reliefs such as Business Property Relief or Agricultural Property Relief are being claimed.

The IHT400 runs to around 20 pages and is accompanied by a suite of supplementary schedules numbered IHT401 to IHT436. Executors complete only the schedules relevant to the estate in question, but identifying which ones apply is itself part of the exercise. HMRC provides official guidance on valuing an estate on GOV.UK, and the Probate Registry will not issue a grant of probate until the IHT position has been addressed. For estates liable to tax, that means paying at least the first instalment before the grant issues.

Which Assets Must Be Included in the Estate Valuation?

The taxable estate for inheritance tax purposes under the Inheritance Tax Act 1984 (IHTA 1984) is broader than many people expect. It is not simply what the deceased owned outright; it extends to assets they had a right to benefit from and to gifts they made in the preceding seven years. The following categories must all be considered:

• Residential and commercial property — valued at open market value on the date of death by a RICS-accredited surveyor. The District Valuer at HMRC may review the figure and, for higher-value properties, agreement of the value can take several months.
• Bank and savings accounts — all balances at the date of death, including interest accrued but not yet credited. Joint accounts are included at the deceased’s beneficial share, which may or may not be 50% depending on the circumstances.
• Quoted investments — stocks, shares, unit trusts, and ISAs are valued using the lower of the two prices quoted in the Stock Exchange Daily Official List (the quarter-up rule), plus any accrued income.
• Life insurance policies — any policy not written in trust forms part of the estate and is valued at the sum assured or surrender value as appropriate.
• Personal chattels — vehicles, jewellery, antiques, art, furniture, and general household contents. Professional valuers are required for high-value items; reasonable estimates suffice for ordinary household goods.
• Business interests — sole trader businesses, partnership shares, and unquoted company shares must be included, though Business Property Relief under s.105 IHTA 1984 may reduce or eliminate the IHT charge on qualifying interests.
• Foreign assets — overseas property and bank accounts must be declared where the deceased was UK-domiciled. Double taxation relief may be available under bilateral treaties.
• Gifts in the seven years before death — potentially exempt transfers (PETs) that fail because the donor died within the seven-year window must be brought back into the estate and may attract IHT, subject to taper relief. See our dedicated guide to inheritance tax for a full explanation of PETs.

Debts and Liabilities: What Can Be Deducted?

The taxable estate is the gross estate minus allowable debts and liabilities. Under s.162 IHTA 1984, a debt is deductible if it was incurred for consideration in money or money’s worth — meaning the deceased received something of genuine value in exchange. Deductible liabilities typically include:

• Mortgages and secured loans outstanding on property in the estate.
• Unsecured personal loans, credit card balances, and overdrafts.
• Utility bills, council tax, and similar household liabilities accrued but unpaid at death.
• Income tax and capital gains tax liabilities arising before death, verified against the deceased’s self-assessment record.
• Reasonable funeral expenses, including the cost of a headstone and a modest wake.

HMRC scrutinises large debts carefully, particularly loans from family members or debts connected to pre-death tax planning arrangements. Debts that cannot be shown to have been incurred for genuine consideration will be disallowed.

Completing the IHT400: Key Sections

The core IHT400 form asks for biographical information about the deceased (full name, date of birth, date of death, domicile, and marital status), the names and details of the executors or administrators, whether the deceased left a will, and a summary of the estate’s gross and net values drawn from the supplementary schedules. The summary box on the first few pages is where all the figures feed in, so accuracy in the schedules is essential.

Page by page, the form works through: jointly owned assets; assets held in trust in which the deceased had an interest; nominated assets (such as pension death benefits paid under a nomination rather than the will); gifts and other lifetime transfers; the nil-rate band calculation including any transferable nil-rate band from a predeceased spouse or civil partner (claimed via IHT402); and any reliefs or exemptions being claimed. The nil-rate band for 2026 remains £325,000 under Schedule 1 IHTA 1984. The standard rate of inheritance tax above the available threshold is 40%; a reduced rate of 36% applies where at least 10% of the net estate is left to charity.

Supplementary Schedules: IHT405, IHT407, and Others

The most frequently required supplementary schedules are:

• IHT405 — Houses, land, buildings, and interests in land. Completed for every property in the estate, recording tenure, ownership share, and agreed open market value.
• IHT407 — Household and personal goods, covering furniture, jewellery, vehicles, and general chattels.
• IHT409 — Pensions, including any lump sum death benefits subject to IHT where a nomination has lapsed or the deceased had a pre-March 2006 annuity.
• IHT417 — Foreign assets, required where the deceased held any asset outside the United Kingdom.
• IHT418 — Assets held in trust, covering life interests and discretionary trusts in which the deceased had a qualifying interest in possession.
• IHT435 and IHT436 — Residence nil-rate band claim, used where the deceased’s home is passing to a direct descendant and the additional £175,000 threshold is being claimed.

Submitting the IHT400 and Paying the Tax

The IHT400 must be delivered to HMRC within twelve months of the end of the month in which the death occurred. However, inheritance tax itself is due six months after the end of the month of death, and interest at the prevailing HMRC rate accrues on any unpaid balance from that due date. This creates a practical difficulty: executors must pay the tax before a grant of probate issues, but they often cannot access the estate’s assets to fund the payment without the grant. The Direct Payment Scheme resolves this by allowing participating banks and building societies to release funds directly to HMRC from the deceased’s accounts without requiring a grant first. We explain this in detail in our guide to estate administration.

For property and certain other assets, HMRC allows the tax to be paid in annual instalments over ten years, though interest accrues on the outstanding balance throughout. Once HMRC accepts the account and issues a clearance letter, executors can distribute the estate with confidence that the IHT position has been finalised.

Written by Simon Jenkins, SRA 167489, Solicitor at Curtis Legal Limited (SRA 450129). For advice tailored to your estate, call freephone 0800 214 216 or request a same-day callback.