Dealing with the probate process can be highly stressful. Often you’re dealing with the loss of a loved one while also trying to navigate confusing estate and property valuations. If an inherited property ends up selling for more than the probate valuation, this only adds to your stress. So, what happens if a house sells for a higher price than the probate valuation?
If a property is sold during probate for more than the probate valuation, HMRC might question the accuracy of the initial valuation and request a RICS valuation of the property. If HMRC decides to increase the probate valuation, more inheritance tax will need to be paid. The executors of the will can also amend the probate valuation, which can result in a higher inheritance tax.
Read on to learn more about the potential tax implications if a house sells for a higher price than its probate valuation.
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What if a House Sells for More Than the Probate Valuation?
The probate value of a house is assessed at the time of the homeowner’s death and is used to calculate whether inheritance tax is owed and how much needs to be paid. If the property is later sold at a higher price than the probate value, HM Revenue and Customs (HMRC) can question the accuracy of the initial valuation.
The initial valuation is more likely to be questioned if there is a significant difference in price between the probate value and the sale price, and the property was sold shortly after the valuation. The executors of the will may need to justify the original valuation or provide evidence that supports why the sale price was higher than the valuation. If HMRC finds this insufficient, the probate value might be updated to reflect the sale price, which means more inheritance tax could be owed. This can often be avoided if the house valuation is completed by a trusted RICS-registered surveyor.
If a property sells for more than the probate valuation, but the sale price is less than the inheritance tax threshold, this typically will not lead to intervention from HMRC.
Can You Amend the Probate Value?
If the sale of an inherited property suggests that the probate value was underestimated, the executors of the will can amend the estate valuation. Executors can have the property valued by a RICS-registered surveyor to ensure it’s accurate or use the sale price as a basis to adjust the probate valuation.
The amendment process typically involves submitting a formal request to HMRC with supporting evidence, such as the new professional probate valuation or evidence of the sale price. You will need to submit a form (C4 Corrective Account or C4(S) Corrective Inventory) to HMRC along with supporting documentation, such as new valuation reports or evidence of sale prices.
Amending the probate valuation can have implications on both Inheritance and Capital Gains Tax calculations. For example, increasing the probate valuation to the sale price of the property would mean you are not liable for Capital Gains Tax (as there has been no increase in property value from the time of death to the time of sale). However, it could mean you are liable to pay more Inheritance Tax than previously calculated (provided the updated probate valuation is above the Inheritance Tax threshold).
Do You Have to Pay Capital Gains Tax if the Property Sells for Above the Probate Value?
If a property is sold during probate and the sale price is higher than the probate value, there will usually be Capital Gains Tax to pay. This needs to be reported and paid to HMRC within 60 days of the sale completion date. CGT will also need to be paid if the property is sold for a higher price at a later date (provided it is not the beneficiary’s main residence).
If the inherited property is transferred directly to the beneficiary, there will be no CGT to pay. CGT will only apply if the property is sold at a later date and it is not the main residence of the beneficiary.
Accurate House Valuations for Probates in Greater London and South East England
If an inherited property sells for more than the probate valuation, this can mean you need to pay more inheritance tax and HMRC may question the accuracy of your probate valuation. The best way to avoid this unnecessary stress and the potential expense of paying for a second valuation is to get the property valued by a RICS-registered surveyor.
The team at Crest Surveyors are all RICS Registered, so you can ensure that the property will be valued accurately and the figure will be upheld by HMRC should any issues arise. Our comprehensive probate valuation service is the best way to make the probate process as straightforward as possible. We’ll work closely with you to guide you through all formalities and stages during this difficult time.
Our House Valuations for Probate prices start from £500, inclusive of VAT, and include:
- A written report detailing the condition of the property
- An accurate valuation of the property
- Photographic evidence
Get in contact with one of our team members to receive a quote on any valuations needed for probate-related enquiries.
Probate House Valuations FAQs
What Happens if a House Sells for Less Than Probate Value?
If a property sells for less than its probate valuation, beneficiaries might be entitled to a refund for any inheritance tax overpayment. However, this refund can only be claimed within four years of the date of death and is not always guaranteed.
Read our blog, ‘Can a House be Sold for Less Than Probate Value?’, to learn more.
What Happens if a Probate Valuation Is Wrong?
If an estate is incorrectly valued during probate, this can have implications for the amount of inheritance tax that needs to be paid. If HMRC believes a house probate valuation to be too low, they will investigate through their District Valuer Service and will likely ask for additional evidence or justification for the valuation. If the probate valuation was not completed by a RICS-registered surveyor, the HMRC might dispute the valuation and request a second official RICS valuation. If HMRC believes that a probate or any other part of the estate has been deliberately undervalued, it can impose additional financial penalties.
How Accurate Does a Probate Valuation Need to Be?
A probate valuation needs to be as accurate as possible to avoid potential financial penalties from HMRC and the hassle of paying additional inheritance tax if the initial valuation is found to be too low. It’s best to use a professional RICS-qualified surveyor to ensure an accurate valuation and make the probate process as straightforward as possible.
Read more about official house valuations in our blog, ‘Do I Need an Official House Valuation for Probate in the UK?’.
