Probate Value Vs Market Value Explained

Probate value is the open market value of an asset on the date the person died, reported to HMRC so inheritance tax can be worked out. Market value is what that same asset would realistically sell for today, in the market as it stands.

Same measuring stick. Different dates.

One figure is frozen in history. The other moves every month, and that single difference causes more executor headaches than anything else I deal with.

Two numbers, two jobs. The probate value settles the tax. The market value settles the sale. Trouble starts when an executor lets one of them do the other’s job.

What follows is general information, not tax or legal advice. On your own estate, get a solicitor or accountant to check the figures.

The myth that costs executors money: “probate value is lower”

There is no discount built into a probate value.

It’s a willing buyer, willing seller test on the open market at the date of death. Not a family price. Not a distressed price. Not a favour HMRC does you.

So why does nearly everyone believe otherwise? Two ideas get muddled: a quick cash offer gets called a “probate value”, and a date-of-death valuation gets treated as a concession.

Here’s what I see from the buying side. When our underwriters price a probate property and a RICS surveyor values the same house, the two figures usually match. The exceptions are the unforeseen ones: hidden and undisclosed condition problems, structural issues, Japanese knotweed.

That alignment is the whole point. A probate value and a market valuation are measuring the same house on the same open market.

Which cuts both ways. In a falling market, the probate value can be higher than what the estate eventually banks. And nobody is holding you to it: you are not obliged to sell at the probate value.

What a probate value is actually for

It’s the value of the asset if it had been offered for sale on the open market on the day the person died. A formal, defensible opinion of value rather than an optimistic marketing price. It can legitimately reflect the realistic sale route for that particular property, auction included, where auction is the honest answer.

HMRC then calculates inheritance tax on that figure, not on the price you eventually achieve. And you must give HMRC a value whether or not you ever sell.

The thresholds, since no definition post ever gives them:

• Nil-rate band £325,000. Nothing to pay if the estate is under it, or if everything above it passes to a spouse, civil partner or charity.

• 40% on the excess, dropping to 36% where 10% or more of the net estate goes to charity.

• Residence nil-rate band of £175,000 where the home passes to children or grandchildren, taking the threshold to £500,000. It tapers away on estates above £2m.

• Unused threshold transfers to a surviving spouse or civil partner. Both bands are frozen until April 2030.

Source: GOV.UK: Inheritance Tax

Now the clock, which is tighter than most executors expect:

• Value the estate before you apply for probate.

• If IHT is due, report the value on form IHT400 within 12 months of the death. You cannot apply for probate until you have.

• Pay the IHT by the end of the sixth month after death, or interest starts running.

• IHT on land and buildings can be spread over 10 annual instalments.

Read that sequence again. The tax can fall due before the grant lands and before the house can be sold. That’s exactly where cash-poor estates get stuck.

What goes into the valuation, not just the house

The estate figure covers property and land, savings and investments, jewellery, antiques and collectables, vehicles and business interests. Anything worth over £1,500 should have a professional valuation, while estimates are fine for ordinary household goods and electricals.

Use specialist auctioneers for jewellery, art and collectables, a used-car guide such as Parkers for vehicles, and sold listings on online marketplaces for the odds and ends.

To value a house for probate in the UK, you can use local sales data and estate agent estimates for standard properties, or hire a RICS-accredited surveyor for a formal valuation.

What market value is, and what moves it

Market value is the price the property would realistically achieve on the open market today. It cares about price, not intrinsic worth.

Four things move it between the date of death and completion:

• Time. Property changes vale over time.

• The market. Interest rates, inflation, local supply and demand, seasonality.

• Condition. Clearance, repairs and redecoration push it up. Damp, a dead boiler and a winter of neglect pull it down.

• Sale method and timescale. Same house, three different numbers depending on whether you use an agent, an auction or a cash house buying company.

Right now, London flats are firmly a buyer’s market. With so few investors left, first-time buyers are spoilt for choice and the whole market is intensely price-sensitive. An inherited flat valued in a busier month can be worth noticeably less by the time the probate grant arrives.

None of that means the probate valuation was wrong. A gap between the two figures is normal. It’s just the difference in price over time, after some things changed.

How to produce a probate value that stands up

Six steps. Do these and you’ll rarely have a problem.

• Pick your route by risk, not by cost. Is the estate comfortably under the threshold and a straightforward house? The average of written appraisals from two or three local estate agents, free of charge. Estate near or over the threshold, unusual property, business interests, or beneficiaries who don’t agree? Use a RICS Registered Valuer, Red Book compliant. It costs money and it’s built to withstand HMRC, because it weighs age, construction, structural integrity, state of repair, location and unusual features rather than just recent asking prices.

• Get it in writing, dated to the date of death. A verbal “about £300,000” is worthless to HMRC. Ask for it in writing. And let’s kill the big misconception here: the agent’s figure is not “the probate value” per se. You declare the value, the agent’s appraisal is the evidence, and you carry the liability for getting it right. Not the agent.

• Pull your own comparables. HM Land Registry Price Paid data is free and official. Add the portals’ sold-price archives.

• Evidence the condition. Photograph everything the day you first get the keys. Damp, cracks, a dated kitchen, short lease, subsidence history, knotweed, non-standard construction, cladding issues on flats. Value the property based on that condition, not after you improve it. Check tenure, lease length, restrictive covenants and flying freeholds while you’re at it.

• Apply the joint ownership rules before you enter the figure. Before you enter a figure, work out which joint-ownership rule applies because who owned the property with the deceased changes the number:

  • Joint tenants with a spouse or civil partner: enter half the property’s value. No discount. HMRC’s related-property rules stop couples claiming one.

  • Joint tenants with anyone else (siblings, friends): divide the value by the number of owners, then take 10% off the deceased’s share. The discount exists because a part-share of a house is harder to sell than the whole thing. GOV.UK‘s own example: a £200,000 house owned by four joint tenants gives a £50,000 share, minus £5,000 — so £45,000 goes in the box in the form.

  • If a surviving co-owner still lives there as their main home, a bigger discount, commonly 15%, is often accepted, because a buyer would be getting a share of an occupied house. Take advice before you settle on the figure.

  • Tenants in common: start from the actual share the deceased owned (which may not be an equal split). The same 10% discount can still apply when the co-owner isn’t a spouse.

• Keep the paperwork. Reports, written estimates, comparables, photographs, the will, signed IHT forms. HMRC can ask to see your records up to 20 years after inheritance tax is paid.

Source: GOV.UK: Estimate the estate’s value

What if the house sells for more than the probate value?

The uplift is a capital gain, measured from the date of death to the date of sale.

Probate value £250,000, sale at £300,000, and you have a £50,000 gross gain. A rising local market alone can do it i.e. £300,000 at probate becomes £350,000 a year later.

This article is not going to go into depth on capital gains calculations, and the rates change frequently. But you can easily find up-to-date info about this on other websites.

You must tell HMRC the actual sale price. And plenty of estates pay no CGT at all once allowances and reliefs are applied.

My blunt view: shaving the probate value to duck IHT at 40% usually just shifts the bill to CGT later, with penalty risk bolted on.

Source: GOV.UK: Capital Gains Tax rates and allowances

What if it sells for less than the probate value?

This is common, and it doesn’t mean anyone got the valuation wrong. Markets move and empty houses deteriorate.

It may also be money you can claim back. Where qualifying land or buildings are sold by the appropriate person within four years of death for less than the probate value, the sale price can be substituted for the date-of-death figure and overpaid IHT reclaimed. The claim goes on form IHT38.

Four things to know before you file:

• The loss must exceed the lower of £1,000 or 5% of the probate value.

• It’s all or nothing. Claim on the house, and every qualifying interest sold in the window comes in, including anything sold at a gain.

• It only works if IHT was actually paid. No IHT, nothing to reclaim.

• Qualifying investments sold at a loss within 12 months of death have their own relief, on form IHT35.

There’s a reporting duty running alongside it. Tell HMRC once values are final, or 18 months after the death, whichever comes sooner.

Before that point, you must also tell them if land, buildings or unlisted shares change in value, if you sell land or shares at a loss, if you sell assets you’re paying tax on by instalments, or if the estate’s value moves by more than £50,000.

Don’t just eat the difference. That gap can be real money back.

Source: GOV.UK: Inheritance Tax to pay

Can an executor sell a house below market value?

The short answer is yes, within limits. You must act in the beneficiaries’ best interests and get a proper price, but you are not required to achieve the theoretical maximum in a perfect world.

The real risk isn’t the discount. It’s a beneficiary who feels short-changed, especially where the sale is off-market to someone connected to the family. That’s the sale that gets challenged, not the arm’s-length one at a lower price.

So evidence the decision:

• Marketing history. It was on the open market at a sensible price, and this is what it drew.

• Written comparables and the agent’s viewing feedback.

• Holding costs and risk quantified in pounds, not hunches.

• Unanimous written consent from every beneficiary before you exchange. Strongest protection there is.

• Two independent appraisals of the offer you’re accepting.

The pattern I see most often is the reverse of a bargain sale: an inherited property listed too high, then chased down the market for months. It usually ends in a lower net figure than the honest offer the executor turned down in month one.

And remember that an auction result or a properly marketed cash sale is itself market evidence. If the property genuinely won’t sell at the probate figure, the price it did achieve is the best possible defence of a lower value, and it may open up that IHT38 route for you to claim back any overpayment on the probate valuation.

What HMRC actually does if it checks your figure

HMRC does not check every valuation. It risk-assesses.

If it does open a compliance check, the Valuation Office (the District Valuer) or the Shares and Assets Valuation team may review your figures. HMRC writes to you first, then phones within eight weeks of writing to explain what it’s checking. If the Valuation Office agrees a higher value, you get new calculations.

Get it badly wrong and penalties run to 100% of the additional tax. Over-value the house and you pay IHT the estate never owed, and nobody at HMRC will ring up to point that out. Records are what win these arguments.

The cost of the gap: what waiting for full market value really costs

Holding an empty inherited house isn’t free. Here’s what’s usually missing from the spreadsheet.

• Council tax. A Class F exemption applies while the property sits empty after a death, until probate is granted and typically for six months after the grant. Then full council tax, paid by the estate. Policy varies by billing authority, and Wales works differently.

• Empty homes premium. Once a home in England has been empty for a year, the council can add a premium on top of the full bill: up to 100% extra for homes empty between one and five years, up to 200% extra between five and ten years, and up to 300% extra beyond ten years. Welsh councils can charge up to 300% extra.

• Insurance. Standard buildings cover usually restricts or lapses after 30 to 60 days of vacancy. Specialist unoccupied cover costs more and comes with conditions: inspections, water drained down, post cleared.

• Utilities, garden, security and deterioration. A cold empty house in winter is a burst pipe waiting to happen, and that pipe drops the market value below your probate value.

We had a seller in the Midlands who’d inherited a vacant three-bed mid-terrace. By the time they called us, it had been sitting empty for eight months.

Council tax, insurance, utilities, clearance costs. All of it stacking up, month after month.

We exchanged within a week and completed 28 days later, which is when the bleeding stopped.

Then there’s the money people burn before they get to us. Homeowners who’ve been on the market for months have typically spent up to £2,000 on agent marketing, EPCs and legal work on sales that collapsed. That money is gone.

Your real sale routes, honestly compared

Speed is genuinely possible on a probate purchase. On one, we surveyed the property, paid for the searches and cleared all the enquiries while probate was still being completed, so when the grant came through we bought within 48 hours.

Our cash offer lands within 24 hours, exchange can happen in as little as 48 hours, completion typically takes two to four weeks, and we cover the estate’s legal fees when the executor uses the same independent law firm as we use.

And the thing I say on the phone most days: if the estate isn’t under pressure, no tax deadline is biting and every beneficiary is happy to wait, sell on the open market. A cash sale isn’t right for every estate, and I’ll tell you so.

Common questions from executors

How long is a probate valuation valid?

There’s no formal expiry, but it only ever speaks to the date of death. Don’t recycle it as a marketing appraisal nine months later. Get a fresh market appraisal before you list.

How accurate does a probate valuation need to be?

HMRC wants defensible, not precise to the pound. A written figure with comparables behind it is accurate enough.

Do I have to sell at the probate value?

No. It’s unlikely the sale price will match it exactly in either direction.

Do I need a solicitor or accountant for this?

Yes, if inheritance tax is in play, if the estate is complex, or if the beneficiaries disagree. The tax rules above are general information, not advice on your estate.

This article is general information about probate and property valuation in England and Wales, not tax or legal advice. Tax thresholds, rates and time limits were correct at the time of writing; check the current position on GOV.UK and take advice from a solicitor or accountant on your own estate. Property Rescue is regulated by the Financial Conduct Authority for Sale and Rent Back only (FCA Register 522471).