Calculating the Estate Value

Key facts

The estate includes all assets the deceased owned at death: property, bank accounts, investments, possessions, and some trust interests.
You can deduct liabilities: mortgages, loans, credit cards, and reasonable funeral costs.
Assets are valued at their open market value at the date of death.
Jointly owned assets — include the deceased’s share (usually 50% for joint tenants).
Gifts made within 7 years of death are added back to the estate for IHT purposes.

Overview

Calculating the estate value is the first step in determining whether Inheritance Tax is due and, if so, how much. The personal representatives must identify and value every asset the deceased owned, deduct allowable liabilities, and account for any lifetime gifts made in the 7 years before death.^[1]

Assets Included in the Estate

The estate for IHT purposes includes:^[2]

Property — the deceased’s share of any property they owned (including the family home, buy-to-let properties, and overseas property)
Bank accounts and savings — current accounts, savings accounts, premium bonds, NS&I
Investments — shares, unit trusts, OEICs, bonds, gilts
Personal possessions — cars, jewellery, furniture, art, antiques
Business interests — sole trader businesses, partnership shares, company shares
Life insurance — payouts from policies not written in trust
Trust interests — the value of an interest in possession trust
Pensions — from April 2026, unused pension funds and death benefits
Money owed to the deceased — outstanding loans, tax refunds

How Assets Are Valued

The general rule is open market value at the date of death — the price an asset would reasonably fetch if sold on the open market.^[3]

Asset Type	Valuation Method
Property	Professional surveyor’s valuation or estate agent’s opinion; HMRC may use the District Valuer
Listed shares	Closing price on date of death (or ¼-up rule from the two nearest trading days)
Unlisted shares	Professional valuation considering net assets, earnings, and dividends
Bank accounts	Balance at date of death plus accrued interest
Personal possessions	Open market value; professional valuation for high-value items
Jointly owned assets	The deceased’s share (often 50%), with a discount for jointly owned property if not passing to a spouse

Tip: HMRC’s valuers can challenge estate valuations if they believe assets are undervalued. It is worth obtaining professional valuations for property and high-value possessions to avoid disputes and potential penalties.

Allowable Deductions

The following liabilities can be deducted from the gross estate:^[4]

Mortgage outstanding at date of death
Bank loans and overdrafts
Credit card balances
Utility bills and council tax due
Income tax owing to HMRC
Care home fees outstanding
Funeral costs — reasonable funeral expenses, including a headstone

Restriction on deductions: Since 2013, debts incurred to finance assets that are IHT-exempt (for example, a loan taken out to buy a property left to a spouse) may not be deductible against the chargeable estate. The debt is instead deducted from the exempt portion of the estate.

Adding Back Lifetime Gifts

Gifts made in the 7 years before death are not part of the “estate at death” but they affect the IHT calculation by using up the nil-rate band:^[1]

PETs (gifts to individuals) that fail because the donor died within 7 years
CLTs (gifts into trust) made within 7 years of death — these may need to be recalculated at death rates

These gifts are set against the NRB in chronological order. Any NRB used by lifetime gifts is not available for the estate.

Worked Example

Item	Amount
House (deceased’s share)	£350,000
Bank accounts	£80,000
Investments	£150,000
Personal possessions	£20,000
Gross estate	£600,000
Less: mortgage	−£60,000
Less: funeral costs	−£5,000
Net estate	£535,000
Less: nil-rate band	−£325,000
Taxable estate	£210,000
IHT at 40%	£84,000

If the house passes to a direct descendant, the RNRB of £175,000 would further reduce the taxable estate, cutting IHT to (£210,000 − £175,000) × 40% = £14,000.

Frequently Asked Questions

What is included in the estate for IHT?

The estate includes everything the deceased owned at the date of death: property, bank accounts, investments, personal possessions, business interests, life insurance payouts not held in trust, and from April 2026, unused pension funds. Gifts made within 7 years of death are also taken into account.

How are assets valued for IHT?

Assets are valued at their open market value — the price they would reasonably fetch if sold on the open market at the date of death. For property, this typically requires a professional valuation. For shares, the Stock Exchange closing price on the date of death (or the average of the two nearest trading days) is used.

What debts can be deducted from the estate?

Allowable deductions include: the outstanding mortgage, bank loans and overdrafts, credit card balances, utility bills, income tax owed to HMRC, care home fees due, and reasonable funeral expenses. However, debts used to acquire exempt assets (e.g. a loan to buy property left to a spouse) may be restricted.

How do I value personal possessions?

Personal possessions (chattels) should be valued at their open market value. For items of significant value — jewellery, art, antiques, classic cars — a professional valuation may be needed. For everyday household contents, a reasonable estimate is acceptable. HMRC may query values they consider too low.

Sources

How Inheritance Tax works: thresholds, rules and allowances — GOV.UK
Valuing the estate of someone who’s died — GOV.UK
IHTM09000 – Valuation of assets — HMRC
IHTM28000 – Deductions — HMRC