Open Market Value for Probate — What It Means and Why It Matters

Open Market Value (OMV) is the legal standard used to value assets for Inheritance Tax. It represents the price an asset would reasonably fetch if sold on the open market between an unconnected willing buyer and willing seller, with both parties acting prudently and having reasonable knowledge of the relevant facts.

For Inheritance Tax, OMV is the statutory valuation basis. It is not automatically the price the deceased paid, an insurance replacement figure, sentimental value, or a dealer's quick-sale offer. It is the price the asset might reasonably have fetched on the open market at the date of death.

Getting OMV right matters because using an inappropriate replacement figure may overstate an asset, while an unsupported low estimate may prompt questions. The personal representative should retain evidence showing how the declared figure was reached.

The legal basis for OMV is section 160 of the Inheritance Tax Act 1984, which provides the foundational rule for all IHT valuations. The full statutory text reads:

"Except as otherwise provided by this Act, the value at any time of any property shall for the purposes of this Act be the price which the property might reasonably be expected to fetch if sold in the open market at that time; but that price shall not be assumed to be reduced on the ground that the whole property is to be placed on the market at one and the same time."

Two principles emerge from this short section. First, the value is what the property "might reasonably be expected to fetch" in an open-market sale — a hypothetical, not an actual, transaction. Second, no discount is permitted on the basis that selling everything at once would depress prices. This is sometimes called the "no flooding" rule, and it prevents executors from claiming a lower value simply because the estate contains a lot of similar items.

OMV assumes a hypothetical sale on the date of death. The valuer asks: if this item had been offered for sale in its actual condition, on the actual date of death, in an appropriate open market, what would a willing buyer have paid?

HMRC's Inheritance Tax Manual confirms that costs incurred in making the sale are not deducted from OMV. Auction commission, transport, insurance during transit, and similar selling costs are ignored — the value is the gross sale figure a buyer would pay, not the net figure the seller would receive.

Restrictions that might prevent an actual sale (a leasehold restriction on a property, an export licence on an artwork) do not change the valuation methodology either. The asset is valued under the statutory framework regardless of practical sale impediments, with appropriate market evidence considered for similar restricted assets.

OMV is fixed at the date of death. Subsequent price movements — whether the item rises or falls in value before the valuation report is produced — do not change the figure to be reported on the IHT400.

In practice, valuers establish OMV by reviewing comparable sales close to the date of death. For jewellery, watches, art, and antiques, this typically means recent auction results from the months either side of the death. For property, the Valuation Office Agency expects evidence from comparable sales within three to six months of the date of death.

This date-of-death rule has practical consequences. If the deceased held shares that crashed two months after death, the executor still pays IHT based on the higher pre-crash value. Conversely, if a painting dramatically rises in value after death due to a re-attribution, the lower pre-discovery value applies for IHT — although Capital Gains Tax may then apply on subsequent sale.

Confusion between valuation bases is one of the most common — and costly — mistakes executors make. The table below clarifies what OMV is and is not.

No — "probate value" is not a separate, discounted valuation basis. For Inheritance Tax purposes, the probate value of an asset is its Open Market Value at the date of death. There is no rule that a probate valuation should come in ten per cent below what the asset would sell for, and no legal basis for a valuer to apply a blanket "probate discount".

The belief that probate value is lower than market value usually comes from comparing it against the wrong figure. An estate agent's appraisal is a marketing figure — an asking price pitched to win the instruction, often optimistic. An insurance schedule states replacement cost, a higher basis altogether. And a house-clearance or trade buyer's offer sits below OMV because it assumes a quick sale without proper marketing. Set against an inflated comparison, an accurate Open Market Value figure can look "low" when it is simply realistic.

A date-of-death value can also legitimately differ from the price later achieved, because the market moves between death and sale. That is a timing difference, not a different valuation standard.

Deliberately choosing a cautious low figure to reduce Inheritance Tax is a false economy. The Valuation Office Agency can review property figures, and where a value is ascertained for IHT it generally becomes the acquisition cost for Capital Gains Tax — so an artificially low probate value can simply move tax from one regime to another, with interest and possible penalties on top if the figure cannot be supported.

A qualified probate valuer establishes OMV through evidence-based research, not opinion. The methodology combines physical inspection of the item with research into comparable sales.

For chattels — jewellery, watches, art, antiques, classic cars, gold — the gold standard of evidence is recent auction results for comparable items. Major auction databases (LiveAuctioneers, the-saleroom.com, Christie's and Sotheby's archives, specialist house results) provide thousands of sale records that valuers cross-reference against the asset being assessed. Sales after the date of death, particularly those at auction, are explicitly recognised by HMRC as providing "the best evidence of the open market value".

For property, the RICS Red Book methodology requires valuers to identify three to five comparable sales of similar properties, adjust for differences (size, condition, location, date), and arrive at a defensible figure. The Valuation Office Agency reviews property valuations submitted to HMRC and may challenge figures unsupported by comparable evidence.

The result is a written valuation report that documents the items, their condition, the comparable evidence reviewed and the OMV figure reached. Retain it with the estate records and attach it where the relevant form asks; HMRC may still review the figure, but the report helps demonstrate its evidential basis.

OMV contributes to the value on which any Inheritance Tax is calculated. The final tax position also depends on liabilities, exemptions, reliefs, available nil-rate bands and the applicable rate, so a change in one asset's value does not always produce a matching tax change.

Overstatement and understatement can both cause problems. Using an insurance figure rather than OMV may inflate the reported estate, while an unsupported low figure may result in additional tax and interest if HMRC substitutes a higher value.

Penalties are behaviour-dependent rather than automatic: HMRC considers whether reasonable care was taken and whether any inaccuracy was careless or deliberate. Personal liability also depends on the circumstances, including how the estate has been administered and distributed.

A suitably experienced valuer can provide a reasoned OMV figure and supporting evidence. Professional indemnity insurance may respond to a valid negligence claim subject to its terms, but it does not guarantee HMRC acceptance or automatically pay an estate's additional tax. Valuation fees are not deductible in the IHT calculation.