What Happens When Property Sells for More Than Probate Valuation?
Published / Last Updated on 15/06/2023
HMRC requires that property and assets are valued at their ‘open market value’ at the date of death when valuing assets and the estate for inheritance tax calculations.
- We suggest you should always use a professional surveyor to value the property for estate calculation and probate.
So, what happens if the property sells for more than the valuation given for estate, inheritance tax and granting of probate?
- The property cannot be sold until any inheritance taxes have been paid and probate has been granted. This means, it is a regular occurrence that a property may sell for more or less than the valuation given for probate.
- If the property is sold for less than the probate valuation, it is usual for an adjustment be made to the estate accounts with any inheritance tax calculation adjusted. HMRC will then issue a refund on inheritance tax if due.
- If the property is sold for more than the probate valuation, it is usual for an adjustment be made to the estate accounts with any inheritance tax calculation adjusted. HMRC will then expect additional inheritance tax to be paid, if any.
Rather Keep IHT Bill the Same and Pay Capital Gains Tax on the Profit Since Death?
Given inheritance tax is 40% and capital gains tax is 18% for basic rate taxpayers and 28% for higher rate taxpayers on property gains, it is perhaps understandable that you may wish to leave the probate valuation in place and pay capital gains tax on the difference between probate valuation and sale price?
- As stated above, HMRC will expect you to make an adjustment to the probate valuation and pay any additional inheritance taxes due.
- The onus of proof is on you to prove the original probate valuation used is accurate.
- If you cannot prove your claim of accuracy, you should use the higher selling price.
It does happen from time to time that the open market value is correct at £X and at a level that any agent would expect the property to sell in normal market conditions. That said, if just one buyer is desperate to buy the property at all costs and money is no object i.e., they offer an inflated price over and above the open market value, because markets have changed since death or something has happened locally since death to inflate your property only in the area or the buyer just wants your property and nothing else will do then provided you can prove this, HMRC may concede and let the probate valuation at date of death stand.
