Recent figures suggest a clear shift in approach, with HMRC taking a more active role in checking valuations on residential properties – higher property valuations will almost always mean higher IHT bills.
Why HMRC is focusing on property valuations
Residential property often makes up a large part of an estate. In 2022/23, it accounted for nearly half of the total value of estates subject to IHT.
At the same time, IHT receipts have risen sharply in recent years. Higher house prices and frozen tax thresholds mean more estates are now caught within the IHT net.
One of the clearest signs of HMRC’s focus on property values is the growing number of cases referred to the Valuation Office Agency (VOA), which provides independent property valuations to HMRC.
Referrals to the VOA rose to more than 14,600 in the latest year reported, suggesting HMRC is placing greater emphasis on scrutinising property values to make sure they are accurate.
What this means for executors
For executors, this change increases the importance of getting valuations right from the outset.
If HMRC challenges a valuation, it can lead to:
- Delays in administering the estate
- Additional tax becoming payable
- Interest and, in some cases, penalties
- Potential personal liability for executors in certain situations.
Even where no wrongdoing is intended, relying on informal estimates can create problems. HMRC expects valuations to be properly supported and evidence-based.
Why checks by HMRC are becoming more common
Several factors are contributing to increased scrutiny and a higher likelihood of queries:
- Rising property values, which increase the tax at stake
- Frozen IHT thresholds, bringing more estates into scope
- Greater use of data, technology, and AI by HMRC to identify inconsistencies
- Pressure on HMRC to increase tax revenues through compliance activity.
As a result, even relatively straightforward estates may now be subject to closer review.
How to reduce the risk of a challenge
Executors can take practical steps to reduce the likelihood of HMRC raising queries:
- Obtain a professional valuation from a RICS-qualified surveyor where appropriate
- Avoid relying solely on a single informal estate agent estimate
- Keep clear records of how valuations have been reached
- Seek advice early, particularly where property values may be uncertain or complex.
Taking these steps at the outset can help avoid delays and unexpected costs later.
Why early advice matters
Dealing with an estate is often stressful, and additional scrutiny from HMRC can make the process more challenging.
Getting the right advice early can help ensure that valuations meet HMRC’s expectations and reduce the risk of disputes or further tax liabilities.
How TWM can help
Our Private Client team advises executors, trustees and families on all aspects of estate administration and Inheritance Tax.
We provide clear, practical guidance on property valuations, reporting requirements, and how to manage HMRC enquiries if they arise.
If you are administering an estate and would like expert advice, please contact our Private Client team.