Valuations of assets and the Inheritance Tax consequences
Carly Drummond · Posted on: November 6th 2025 · read
The planned reduction in inheritance tax (IHT) relief is likely to result in more stringent scrutiny of valuations for probate under the new rules.
Currently, qualifying farming and agricultural businesses can qualify for 100% relief via a combination of Agricultural and Business Reliefs.
However, this is now being changed.
From the 6th April 2026, the first £1million of combined agricultural and business property will continue to receive 100% relief. Any business value above £1,000,000, however, will now only attract 50% relief. This results in an effective tax rate of 20% on business value above the threshold.
Market value of assets
When preparing an IHT Return, asset values should reflect their market value as of the date of death. Although significant when considering the Residence Nil Rate Band and re-basing for Capital Gains Tax (CGT), the valuation of a fully exempt business was never really scrutinised due to there being no IHT at stake.
For businesses where the deceased had an interest over £1m, the valuation will, moving forward, become crucial as it will create a tax charge for deaths after 5th April 2026.
Practical implications of valuing assets
The valuation should accurately reflect the assets owned by the deceased. Where this includes a business interest, it will often require a formal valuation of the business itself. In cases of farming businesses, this tends to include a valuation of the underlying assets but will need to also consider whether any of the farm has any inflated value due to options or planning potential.
It is strongly recommended that a professional valuer be invited to the farm to value all the assets as soon as reasonably possible following a death. The longer the delay in getting a valuer in, the greater effort is required to establish the value as of the date of death.
With this in mind, it should be best practice to do some housekeeping as soon as possible. Maintaining an ownership register of land and buildings for the farm with approximate values is a great start.
With there being seven months until the new IHT relief and rules come into practice, individuals and families who may be affected by these changes should consider obtaining tax planning advice as soon as possible as there will also be pressure on valuers and solicitors over the coming months to get any planning signed off in time.
Valuation of lifetime gifts
Although a professional valuation is often not required until after a death, it is advised that when gifts have been made or are being considered, obtaining a valuation at the time of the gift is essential. Such valuations are typically more efficient and less time-consuming than those conducted several years later.
In respect of lifetime gifting, we often never really needed formal valuations for these. The Capital Gains Tax (CGT) arising on gifting could be deferred and we knew that if the 7-year gifting rule ‘failed’ (i.e. there was a death within the 7-year window) that the gift would continue to qualify for relief at 100%. Therefore, it felt unnecessary to formalise this at the time of the gift.
With the new rules coming into force, however, we could see a gift of a business asset (even if made prior to 6th April 2026) result in IHT where it is not survived by 7 years. It therefore becomes important to get a contemporaneous valuation at the date of the gift to understand any future possible exposure and how they may taper off over the years.
Frequently, people are looking to cover the 7-year risk by taking out term life cover to pay out should the gift fail and result in tax. Again, understanding the level of cover required will be crucial in obtaining the right policy and level of cover.
"Valuing business assets is a complex area and, because valuations are to some extent subjective, they are open to challenge by HMRC. Using a reputable business valuation specialist is important to ensure that the financial implications of a gift failing are fully understood and that the appropriate level of cover is obtained. It will also reduce the risk of the business asset value being subsequently challenged by HMRC."
"For the last 6 months I have been increasingly involved in preparing “mock” probate valuations for landowners/ farmers who are trying to establish what tax liability their family would face upon their death after April 2026. This is leading to more and more part and whole interest land transfers to children and grandchildren to utilise the current Potentially Exempt Transfer opportunity. This is particularly so where the land may have future development potential, and therefore attract “Hope” Value, and getting the land valued now, where it is not strategically identified as having potential means that even where the 7 year timeline is sadly not met, the value that falls in to the estate is the value at the date of gift, ( with no hope value) and not the value that reflects the lands status at the date of death which by then may have seen its value increase due to an allocation or pending planning application."
