Valuing house contents for inheritance tax

[franke]

I'm valuing my late mother's estate for inheritance tax purposes. I'm getting into a bit of a panic about the contents valuation. Although the estate is worth around 800k, half of that is her apartment and the rest is investments. Her contents consists of very little of any great worth, certainly no item over £1500. It's what I would consider typical stuff belonging to a frugal 90 year old, living in a modest 3 bed flat.

Do I really need to get a professional valuation? It will probably cost almost as much for the valuation as the value of the contents. Can I donate her clothes to charity or do they need to be included in the valuation? There's nothing special there, no designers. What do I do about items like pictures - she liked them, but they're quite old fashioned. Some nice china but still fetches very little on eBay.

If you've been through this, how did you handle this bit?

Note that it is the open market value which is required, which is what something will sell for. And for many items of used house contents, there is no demand at all and therefore no value for those items.

Do not be influenced by auction site listing. The stated prices are often exagerrated and many if not most items listed do not sell at all. No market means no value.

Is the estate liable for IHT or are you submitting an application to claim RNRB and/or TRNRB?

I only included things with a realistic resale value and chance. So furniture, random pictures, clothing, kitchen stuff, normal books - no value. The pictures that were collectible and I was actually selling, then those got put at the selling price

It's amazing how little stuff is actually worth. We've done two house clearances in the last couple of years. All clothes went to charity. All furniture apart from a piano were either junk or recycled and the piano we only got £100 for. We did send some collectible royal dolton figurines to auction and they sold for under £50 for the lot.

Unless your late DM had any antiques then the contents probably have very little resale value. I think we valued my dad's contents at being less that £1000 for a three bedroom semi. No questions were asked and probate was granted without issue.

Contents will be worth very little usually. Obviously art works, jewellery, antiques etc if applicable should be valued but the remainder is unlikely to fetch more than £1000 at auction.

You might be surprised by some items. I rescued a grubby old rug from MIL’s house clearance, purely because I liked the pattern. I took it to a specialist for cleaning and restoration- and discovered it was a genuine Persian, worth £4,500!

Thanks for these helpful replies. Babdoc that's so exciting but there's nothing lurking here that might be that valuable.

Yes we are liable for IHT which is why I'm a bit cautious. I just wonder if HMRC sees an estate valued at around 750K and doesn't believe that there's nothing of substantial value in the chattels. But dm really did just invest 'for a rainy day', didn't spend much on herself and certainly not on the property which will be a doer-upper for someone. Well the rainy day arrived and only lasted about six weeks, so she barely used any of her nest egg and here we are.

OK, so I've taken loads of pics and listed everything. I only ever look at sold prices at auction. I think I've been honest about it and have a total of around
£1300, which according to the replies here is probably an over estimate. I'm feeling less panicky, thank you.

I have recently completed this process and my mother’s estate was around double what you have quoted. Similarly, about half of the estate’s value was my mother’s house. The house had 4 bedrooms. My mother’s furniture was pretty standard - good quality but not new and to the taste of an older lady. The probate solicitor I used insisted we put in a value for house contents despite me pointing out that clearing the house would cost more than the value of any items. The solicitor was happy with £200 as a total value for house contents and so that was included. It was accepted by HMRC and the IHT has been paid and we have clearance to distribute the estate. I hope that is helpful.

The solicitor was clear that we had to include something or there would be questions. The house did cost more than £200 to clear!

That's really helpful PuffDragon12, thank you. But also amazing - I think that's the lowest estimate I've come across. I suppose in the great scheme of things it's generally going to be the lowest value in the whole estate (unless it's a stately home) so I'm realising the HMRC aren't going to be that bothered 🤷🏻‍♀️

@franke I’m in the same position. I don’t think there is anything in the house that won’t go on the skip. A few nicknacks that I’ll take for sentimental value but nothing else. The loft and garage are also full of furniture from her last house that she couldn’t sell and no-one wanted to buy!

@MrsSchadenfreude Are you doing the whole valuation thing yourself or getting a solicitor? I know this isn't rocket science and I really can do this myself. I just don't want any awkward questions, I want it all to go through smoothly. I always overthink this stuff 🤦🏻‍♀️

@franke I’m planning on doing it myself, but I live overseas so it’s not easy. Did you know that if your Dad died first, you may be able to reduce your IHT liability by adding his to your Mum’s, so you get an extra £325,000 plus an extra £175,000 for the house? I’m hoping we’re going to skim in just under IHT, but I’ve just found yet another bank account and some more shares…

If you are doing the property disregard and the transfer of spousal allowance, you do still have to fill out all the IHT forms, even if the value comes under in the end, but if you are methodical it isn't hard. I did the probate for both of my parents on my own and it wasn't nearly as hard as I thought it would be

Yes, I'm overseas too so, yes, I find it easy to be very focused and organised when I'm in the UK but as soon as I come home I feel very disjointed. My parents were divorced so there's no allowance to pass on unfortunately. It's all fairly straightforward except where I have to dream up this value myself.

I also don't really understand why a surveyor's valuation of the apartment is better than an estate agent's. Surely the estate agent has a better idea of what a property will sell for which means the IHT paid up front will be more accurate 🤷🏻‍♀️

Hi OP, if the estate is liable to inheritance tax then HMRC will expect you to provide a professional valuation of the contents. You can try submitting your inheritance tax return without one, and I've seen clients do this successfully, but HMRC do sample random returns and would be entitled to request a valuation if they notice it's missing. If you're not obtaining a valuation you must disclose clearly on the IHT400 (in the box on the right hand side of page 13) that you've used an estimate. Not to worry you unduly, but HMRC can apply penalties and interest in these situations so do be careful.

I'm a Private Client solicitor who specialises in IHT and Executries.

Thank you @Lostintranslation63 Will just a house clearance company estimate do? We will be using a company at some point to remove the large furniture. On what basis would the HMRC impose penalties?

This is what I did. I asked a local "auctioneers" company (who also did house clearances) what he thought when he was looking around. He said there wasn't much of value and to put an estimate of £500. He said the potential highest value things were a piano and a carpet, but they also might not get much. He didn't put anything in writing, but I trusted his judgement. Sure enough - neither went for more than £50, and in the end we broke even - ie the value of the items sold at auction just about covered the cost of the clearing of the house. I put £500 on my IHT form, and said that it was an estimate. IHT accepted that with no questions asked.

With house prices in the SE what they are it really isn't difficult to get yourself into IHT territory (esp if the person was divorced), and it doesn't necessarily mean that they have lots of high value items. If you are interested in the process of applying for probate, paying IHT etc - I have posted my experiences here in case that is useful. Good luck with it!

Clearing my late parents house now - goodness what a job
Skip was £360
For a house clearance guy coming today to take away beds, shed contents and whatever else we can fit on there, his price varies depending on what he's collecting but he'll cost around £350.

Meanwhile stuff just sold at auction made £270. There is more to go and between quality than what's already gone but it doesn't go for much! Clothes have gone to charity

Thanks both. @QuestionsOnAPostcard that post of yours setting out what you did has been my go to these last weeks, particularly when I'm losing focus.

@CrotchetyQuaver did you have to include any value for the clothes before they went to charity?

@franke no we didn't. I've sold odd things that were nice on eBay but they've not gone for huge amounts. We've had a solicitor doing the paperwork and telling us what we needed such as an auctioneer to put a value on the contents. Value of clothing was never mentioned.

Hi @franke,
We also didn't include value of clothes, as they all went to the charity shop. Same with lots of other household goods.

I wondered if you have tried to speak to the IHT helpline (0300 123 1072)? I know it can take a while to get through, but I found them very helpful, and they answered many of my questions - including the one about personal belongings and I found it very reassuring. (They said they were basically looking for high value stuff like cars and jewelry... my mum had neither)
Hope that helps!

I will call them although the last person I spoke to gave me inaccurate info about how to declare gifts I think. But it's also really helpful to hear how other people handled this stuff.

There is a car and I have a valuation for it; it's the most valuable possession by far. Very little jewellery, nothing more than a couple of hundred pounds scrap value such as her engagement and wedding rings, otherwise just trinkets.

Condolences on the loss of your DM, @franke

Just on the point of a surveyor's valuation of property vs, say, the average of 3 estate agent valuations - a properly accredited RICS surveyor will take into account similar properties in the area, look at a sample of comparable recently-sold prices, and make a proper assessment of the actual realistic value of the property to provide a current valuation. Estate agents will give you what they think they could market the property for - so they’re not necessarily the same thing!

(I'm not a surveyor or an estate agent but I have recently been through this process so the issue came up for me too)

Thanks @ElectiveAffinities It still makes no sense to me though since, once the flat is sold, if the price is wildly different from the estimate it will trigger either an extra payment or a refund of IHT. So date-at-death value is kind of a moot point. Or am I missing something?

And when I spoke to someone at the HMRC, she seemed to encourage me to put in a higher value and then claim back the overpayment of IHT later once the flat is sold for less.