Five values, and most probate applications ask for all of them
The gross value of an estate is what everything in it was worth on the day of the death, before a single debt is taken off. Take the debts off and what remains is the net value. Where an estate qualifies as an excepted estate, which HMRC says covers most estates, the probate application in England and Wales carries both figures twice over, because inheritance tax and the registry measure the same house on different bases.
HMRC’s manual on the information personal representatives must deliver sets out five values for that application: three for inheritance tax, two for probate. The two gross figures rarely coincide, and what pulls them apart is gifts made in the 7 years before the death, assets that pass without a grant, and the deceased’s share of jointly owned property. An estate reporting in full on form IHT400 sends HMRC the detail behind them instead.
The three inheritance tax values
| Figure | What HMRC counts in it |
|---|---|
| Gross value for inheritance tax | The total value of all the assets of the estate before any debts are deducted, plus any specified transfers and specified exempt transfers made in the 7 years before the death |
| Net value for inheritance tax | The gross value for inheritance tax, less any allowable debts payable out of those assets |
| Net qualifying value | The net value for inheritance tax, less any spouse or civil partner exemption and any charity exemption |
HMRC states that the net qualifying value can be nil. An estate of £800,000 left entirely to a surviving husband or wife has a gross value of £800,000 and a net qualifying value of nothing.
The two probate values cover less
The gross value for probate counts only the assets for which a grant of representation is required, before any debts, reliefs or exemptions, and it includes the deceased’s share of jointly owned assets that do not pass automatically to the surviving owner. Anything changed by a deed of variation after the death is ignored for this figure.
From that total come the debts the deceased owed when they died: household bills, uncleared cheques for goods and services already supplied, credit card balances, and a mortgage or a share of one on property that needs a grant. Funeral expenses are named in this definition and not in the inheritance tax one, which is a difference in how the two figures are built rather than a deduction the estate loses. Reasonable funeral expenses are specifically allowed under section 172 of the Inheritance Tax Act 1984, and a full return claims them at box 81 of IHT400.
The probate pair also sets what the application costs: the fee is £526 where the estate is worth more than £5,000 and nothing at or below that.
Where the contents figure lands
Household and personal goods go into the gross value for inheritance tax in full, and nothing in the house is too ordinary to count. On a full return the total of boxes 1 to 4 of form IHT407 carries across to box 55 of IHT400, which the IHT407 guide works through box by box, and in an excepted estate that same total goes into the probate application. Household goods generally pass without a grant, so they sit outside the probate pair, which is one of the reasons the two gross figures differ.
What the three tax figures look like on one estate
Take the contents of the Sussex farmhouse in the price records, catalogued as 42 lots and sold for £7,300 at hammer, an illustrative figure rather than a particular sale. A hammer price obtained soon after the death stands in for the open market value at the date of death, the basis HMRC asks for. Put the contents in an estate with the house at £420,000, £35,000 in savings, a £60,000 mortgage and half the residue left to a surviving wife.
| Line | Amount |
|---|---|
| House | £420,000 |
| Savings | £35,000 |
| Contents | £7,300 |
| Gross value | £462,300 |
| Mortgage | £60,000 deducted |
| Net value | £402,300 |
| Spouse exemption on half the residue | £201,150 deducted |
| Net qualifying value | £201,150 |
The gross value sits above the £325,000 inheritance tax threshold and the net qualifying value sits below it. The threshold is tested against the third figure rather than the first, which is what keeps an estate of this shape out of a full return. Other conditions require full details whatever the values come to, among them gifts of more than £250,000 in the 7 years before the death.
Which figure meets the threshold
The threshold is £325,000, and there is no inheritance tax where the estate falls below it or where everything above it passes to a spouse, a civil partner, a charity or a community amateur sports club. A home passing to children or grandchildren can take that threshold to £500,000. For an estate that qualifies through the exemption rather than through its size, HMRC requires the gross value not to exceed £3 million and the net chargeable value, after liabilities and spouse or charity exemption alone, not to exceed the nil rate band. No other exemption or relief counts towards that test. The four routes to excepted-estate status are set out in the IHT407 guide above.
The one figure an executor arrives at themselves
Of the five, the contents are the figure the executor produces themselves, and the one most likely to be questioned later, because a single item entered low and sold high a year afterwards is visible in a catalogue. Value the contents before anything leaves the building, which is what the probate valuation guide and the house clearance guide are both ordered around.
