When someone dies, there is a lot to consider at a difficult time. One often daunting task is calculating any Inheritance Tax due and ensuring the correct amount is paid to HMRC. If the deceased owned any property, it is important to know its accurate value, and that is where a RICS registered valuer can help.
Let us find out more about property valuations for Inheritance Tax and why they are so crucial…
What is Inheritance Tax?
Inheritance Tax is tax paid to the government when someone dies. It is calculated as a percentage of the value of their estate (property, money, belongings and the value of any gifts given in the seven years before death). There are some circumstances in which no Inheritance Tax may be due, including:
- If the value of the estate is below £325,000 (the current threshold).
- Everything above the £325,000 threshold is left to the deceased’s spouse, civil partner, charity, or community amateur sports club.
What is an Inheritance Tax valuation?
An Inheritance Tax valuation calculates
a) the value of the estate and
b) any tax that must be paid.
How Inheritance Tax house valuations are calculated
An Inheritance Tax house valuation often makes up a large proportion of the value of the estate. It is calculated as the price the property would likely achieve if sold on the open market on the date of the owner’s death. It is essential that the value is accurate so that the correct amount of tax is paid.
A RICS Registered Valuer will inspect the property and consider factors such as location, condition and recent comparable sales to determine the valuation.
Who arranges an Inheritance Tax property valuation?
The deceased identifies an executor of their estate in their will. The person (or people) named are legally responsible for taking care of any assets, i.e. paying off debts and taxes (including Inheritance Tax) and distributing what’s left to the beneficiaries.
It is the executor’s responsibility to arrange an Inheritance Tax valuation and take action accordingly.
Is there a deadline for getting a valuation?
You must submit the estate’s value to HMRC within 12 months of the date of death.
What happens if HMRC disputes the valuation?
If HMRC believe the incorrect amount of inheritance tax has been paid, they may get in touch. If this happens and you believe the valuation was correct, it is sensible to contact a lawyer to help argue your case.
Asking a RICS Registered Valuer for an Inheritance Tax valuation significantly lowers the risk of HMRC disputing the tax paid as the calculations are completed by a competent, impartial expert.
Is a formal RICS valuation necessary?
You can carry out your own valuation, but this can become complicated, and you risk submitting incorrect information (and facing problems with HMRC down the line). It is strongly advisable to ask a professional for help.
As it is based on market value, you might assume an estate agent could provide a house valuation for Inheritance Tax purposes. However, they will only offer an opinion on market value and are not best placed for formal valuations. In many cases, this will not be accepted for taxation purposes.
RICS Registered Valuers are specifically trained and qualified to provide Inheritance Tax valuations. Reassuringly, their valuations are accurate, are backed by a thorough report compliant with the RICS Valuation – Global Standards (often known as ‘The Red Book’) and are accepted by HMRC.
Can I use the same valuation to sell the property?
An Inheritance Tax house valuation reveals the value of the property on the date of the owner’s death. Because this value may change between that date and when it goes up for sale, it is sensible to get a new valuation when preparing to sell.
Estate agents usually offer free market appraisals, and it is sensible to arrange for one when selling.
What if the property sells for more/less than the Inheritance Tax valuation?
It is quite possible that the property may sell for more or less than the Inheritance Tax valuation. If the HMRC believes you should have paid more tax, they may try and claim this from you.
On the other hand, if you believe you have paid too much tax, you may have a case to claim some back. However, you must keep in mind that your Inheritance Tax property valuation is the market price on the day the owner died, and that could be significantly different to the value on the day of sale.
To help avoid disputes and to give peace of mind, it is worth asking an RICS Registered Valuer for an expert Inheritance Tax valuation as this carries significant weight with HMRC.
How are Inheritance Tax valuations carried out?
Our RICS Registered Valuers carry out Inheritance Tax valuations with compassion and professionalism. We understand this can be a very difficult time for our clients which is why we communicate clearly, are accurate with our work and always sensitive in our approach.
When valuing a property, we will come and inspect it and consider:
- Property size
- Property condition
- Any planning and construction concerns
- Location
- The value of similar properties
- Any environmental concerns
This helps inform our detailed report and ultimate valuation which can be submitted to HMRC.
Get in touch
If you have any questions about our property valuations for Inheritance Tax, please get in touch. Whether you are ready to book or would like to talk about your options, we are here to help.