IHT405 Explained: Houses, Land and Buildings for Inheritance Tax
In brief
IHT405 is the schedule to form IHT400 on which every house, flat, plot of land or building in the estate is reported. For each property it wants the address, tenure, occupation, the date-of-death Open Market Value, who valued it, and whether a sale is expected within twelve months. HMRC passes the figures to the Valuation Office Agency, so the value should be one you can evidence.
When You Need to Complete IHT405
Schedule IHT405 is only needed where a full Inheritance Tax account, form IHT400, is being submitted. Excepted estates report property values through the probate application instead and never see the schedule. If the estate is over the excepted-estate limits, or Inheritance Tax is due, or a residence nil-rate band or a second transferred allowance is being claimed, the IHT400 is required and every interest in land goes on IHT405.
That includes the family home, a share of a home held with someone else, a buy-to-let, a holiday flat, farmland, a garage plot, a commercial unit, and any land held under a lease with value. Property held abroad goes on IHT417 instead. Timeshares and rights of way are interests in land and belong here too, though they may be worth little.
The schedule is not where you claim agricultural or business relief. Those are separate schedules (IHT414 and IHT413). IHT405 wants the full Open Market Value before any relief.
What the Form Asks, Section by Section
IHT405 runs to several pages but asks the same set of questions about each property. Working through them in order:
- Address and description: the full postal address, a description (detached house, flat, land), and whether it is freehold or leasehold. For leasehold, the unexpired term matters and should be stated.
- Who occupied it and on what terms: whether the deceased lived there, whether it was let and to whom, any tenancy agreement, and any occupation by a family member without a tenancy.
- Joint ownership: whether the deceased held the property with anyone else, their share, and whether it was a joint tenancy or a tenancy in common. Only the deceased's share is valued, and the schedule cross-refers to IHT404 for jointly owned assets.
- Value at the date of death: the Open Market Value of the deceased's interest, in pounds, with no rounding.
- How the value was reached: whether a professional valuation was obtained and by whom. If it was, attach a copy. If it rests on estate agent appraisals, keep them; HMRC will ask.
- Development potential and planning: whether any planning permission exists or has been applied for, and whether the property has development potential that a buyer would pay for. Hope value is part of Open Market Value.
- Damage and defects: structural problems, subsidence, flood history or anything else that reduces the value below what the sales data would suggest.
- Intended sale: whether the personal representatives intend to sell within twelve months of the death, and, if a sale has already been agreed, the price and date.
How to Value a Property for IHT405
The figure is the price the deceased's interest would have fetched on the open market on the date of death. It is not the asking price, the mortgage valuation, the council tax band midpoint or the number on an insurance schedule. Because the IHT400 route means the estate is being examined, the evidence standard is higher than for an excepted estate: a reasoned valuation, not a best guess.
A RICS Red Book valuation is the usual answer. The surveyor values at the date of death using comparable sales from around that date, adjusts for condition, tenure and any joint ownership discount, and produces a report that can be attached to the schedule. It costs £150 to £500 for an ordinary house and more for land, commercial property or anything unusual.
Estate agent appraisals are accepted on IHT405 but carry less weight. If the estate is taxable and the property is the largest asset, the difference between a figure that survives a Valuation Office Agency review and one that does not is likely to exceed the fee many times over.
House valuation for probate: estate agent, RICS or online estimate
Joint Ownership, Tenancies and Discounts
Where the deceased co-owned the property with a spouse or civil partner, the share passes exempt and no discount is applied, because the related property rules value the couple's interests together. Where the co-owner is anyone else, HMRC commonly accepts a discount of around 10% on the share to reflect the difficulty of selling a part interest, and around 15% where the co-owner occupies the property as their home. State the discount and the reason on the schedule rather than silently applying it.
A property let on an assured shorthold tenancy is usually valued with vacant possession in prospect, because the tenancy can be ended. A property let on a protected or regulated tenancy that cannot be ended is worth materially less, and the valuation should say so. Occupation by a family member without a tenancy is not a reason to discount.
What HMRC Does With the Figures
HMRC refers IHT405 values to the Valuation Office Agency. A District Valuer compares each declared figure with Land Registry sales, the agency's own records and, if the figure looks low, an inspection. Values within the range of comparable sales are accepted without correspondence. Values well below it prompt a letter proposing a higher figure, and the personal representatives then have to justify their number.
A Red Book report shortens that exchange because the evidence is already in it. A figure supported by a RICS surveyor is negotiated between professionals; a figure supported by an estate agent's letter is generally not defended at all, and the District Valuer's number tends to stand.
The intended-sale question exists because a sale within a year is the best evidence there is. If the house sells for materially more than the declared value, HMRC may substitute the sale price and charge the additional tax with interest. If it sells for less within four years, the executors can claim loss on sale relief so that the lower price is used instead.
Selling for more or less than the probate value: what follows
Common Mistakes on IHT405
The same errors recur in HMRC enquiries.
- Reporting the whole value of a jointly owned property rather than the deceased's share.
- Applying a co-ownership discount to a share held with a spouse or civil partner.
- Using today's value rather than the date-of-death value when the valuation was obtained months later.
- Omitting hope value on a large garden or a plot with planning potential.
- Netting off the mortgage. The mortgage is a liability reported separately on IHT400; the property is entered gross.
- Forgetting that a sale agreed before the form is filed must be disclosed.
- Rounding the value to a tidy number. Enter the figure the valuer gave.
Ready to arrange one? Learn more about our RICS house valuations for probate.
Frequently Asked Questions
01Do I need a professional valuation for IHT405?
HMRC does not require one, but the schedule asks whether one was obtained and the values are reviewed by the Valuation Office Agency. For a taxable estate a RICS Red Book valuation is the standard evidence and is usually worth its fee. For a property that is a small part of a large exempt estate, estate agent appraisals may be proportionate.
02Can I put an estimate on IHT405 and correct it later?
The IHT400 allows provisional figures where a value is genuinely not yet known, and they must be flagged as provisional and corrected using form C4 once known. It is not a route for avoiding a valuation; HMRC expects the estimate to be reasonable and the correction to follow promptly.
03Where do I report the mortgage on a property?
On the main IHT400, as a liability of the estate, not on IHT405. The property is entered on IHT405 at its full Open Market Value and the debt is deducted separately.
04What if the property was sold before the IHT400 was filed?
Enter the sale details in the intended-sale section. If the sale was at arm's length shortly after the death, HMRC will usually accept the sale price as the date-of-death value. If the sale price is lower than a valuation already obtained, consider whether loss on sale relief is available.