Administering a deceased person’s estate is already an emotionally taxing process. The paperwork, the deadlines, and the legal obligations fall upon executors at what is often the most difficult period of their lives. Now, a significant new pressure is emerging, one that private client practitioners are watching closely.
Freedom of Information figures obtained by TWM Solicitors reveal that the number of cases referred by HMRC to the Valuation Office Agency (VOA) rose by 23.5% in the year to September 2025. This is not a marginal uptick – it represents a deliberate and material escalation in scrutiny of the property valuations that executors declare in Inheritance Tax returns.
23.5%
Rise in VOA referrals in the year to September 2025
£325,000
Nil-rate band, frozen since 2009
£1 million
maximum threshold for married couples/civil partners
*VOA referral figures: Freedom of Information Request, TWM Solicitors, 2025
Why is this happening now?
The answer lies in a combination of frozen tax free thresholds and rising house prices that has steadily expanded the number of estates subject to IHT. The nil-rate band – the threshold below which no IHT is payable – has been fixed at £325,000 since 2009. Over the same period, average residential property values across the UK have climbed significantly, particularly following the covid pandemic-era market surge.
The result is that property, which for many people represents the overwhelming majority of their wealth, is now far more likely to tip an estate above the tax free allowance than it was a decade ago. With more money at stake, HMRC has evidently determined that closer scrutiny of property valuations is warranted, and it has the data tools to act on that determination, cross-referencing declared values against comparable Land Registry transactions.
What is the Valuation Office Agency and what happens when HMRC refers a case?
The VOA is an executive agency of HMRC with specialist expertise in property valuation. When HMRC believes that a property included in an estate has been undervalued – thereby reducing the IHT liability – it can refer the matter to the VOA for an independent assessment.
If the VOA arrives at a higher figure than the one declared, HMRC will seek to recover the additional tax – currently charged at 40% on the amount above the applicable threshold. Interest runs from the date the tax should originally have been paid. Where HMRC considers the undervaluation resulted from a failure to take reasonable care, penalties may also apply which ranges from 30% to 100% of the additional tax in the most serious cases.
Executors who have already paid inheritance tax and distributed the estate before an enquiry opens may find themselves personally liable for any shortfall the estate can no longer cover. This is a risk that is rarely appreciated at the outset of estate administration – and it underlines why accurate valuations matter from day one.
A note on professional valuations: An RICS-qualified surveyor’s report prepared specifically for inheritance tax purposes carries considerably more weight with HMRC than a standard estate agent’s market appraisal. Estate agents’ valuations are geared towards achieving the best sale price – not providing the forensic, date-of-death open market assessment that the law requires. The cost of commissioning a proper valuation at the outset is almost invariably less than the cost of a VOA dispute later.
The legal duty of executors
It is worth restating a fundamental point: executors have a legal duty under the Inheritance Tax Act 1984 to report the accurate open market value of all assets at the date of death. Open market value is the price the property might reasonably be expected to fetch if sold on the open market at that date – a precise legal standard, not an approximation.
Many executors (typically family members without professional experience of estate administration) simply do not know this. Acting in good faith is not, of itself, a complete defence if reasonable care was not taken. Early legal advice, and a robust paper trail supporting the valuation, are the most effective protections available.
Understanding Inheritance Tax thresholds
One of the most important steps any family can take is understanding exactly where they stand relative to the IHT thresholds. The position is more nuanced than many people realise.
NIL-RATE BAND THRESHOLD
£325,000
Standard threshold for all estates. Frozen since 2009.
RESIDENCE NIL-RATE BAND THRESHOLD
Up to £175,000
Addintional allowance when a home is left to a direct descendant
COUPLES COMBINED THRESHOLD
Up to £1 million
Married couples and civil partners can transfer unused allowances up to £1m.
Many families are unaware that the residence nil-rate band exists, or that unused allowances can be transferred between spouses and civil partners. Ensuring these reliefs are properly claimed is one of the most straightforward, and valuable steps a solicitor can assist with.
Planning ahead: reducing the Inheritance Tax bill
While the VOA referral statistics are a warning about estate administration, the broader context is really a prompt for lifetime planning. There are legitimate and well-established strategies that, if put in place early enough, can substantially reduce, or in some cases eliminate IHT liability.
The seven-year gifting rule is among the most powerful tools available. Gifts of any size made more than seven years before death are completely exempt from inheritance tax. For those with significant assets, this means that a structured gifting programme can meaningfully reduce the eventual IHT exposure on your estate. In theory, even a property could be gifted and, provided the donor survives seven years and no longer benefits from living in it, its value would leave the estate entirely.
Gift made
Any gift of any size can be made. It enters a seven-year clock from this date.
Years 1-3
If the donor dies, the full value of the gift is included in the estate for IHT.
Years 3-7
Taper relief applies on a sliding scale, reducing the IHT charge on the gift progressively.
After 7 years
The gift falls outside the estate entirely – no IHT payable on it, regardless of size.
Other planning tools – including the annual gifting exemption, charitable legacies, and the use of trusts – can complement a gifting strategy. Each family’s circumstances are different, however, and what works well in one situation may not be appropriate in another. Professional advice is essential before any significant lifetime planning is undertaken.
Practical steps for executors and their advisers
- Commission a RICS Red Book valuation from a qualified surveyor at the earliest opportunity, specifically prepared based on the inheritance tax rules
- Retain all documentation supporting the valuation, including comparable evidence and any correspondence with the valuer
- Where a property has unusual features like development potential, restrictive covenants, or structural issues, ensure these are addressed explicitly in the report
- If a property is sold after death for more than the declared value, take legal advice promptly about whether a corrective IHT return is required
- If the VOA does open an enquiry, engage with it promptly and consider instructing a specialist valuer to represent the estate's position
- Ensure all available reliefs, including the residence nil-rate band and any transferable allowances are properly claimed before the return is submitted
A final word
The 23.5% rise in VOA referrals is a clear signal from HMRC that property valuations in IHT returns are under greater scrutiny than ever before. For families navigating the administration of an estate, the message is straightforward: accurate valuations, properly evidenced, are not optional. For those thinking about the longer term, it is an equally clear prompt to review whether lifetime planning measures are in place.
In both cases, early advice from a specialist private client solicitor is the most effective and cost-efficient investment a family can make.
How Our Bereavement Team Can Help
Whether you are currently administering an estate, concerned about a property valuation, or simply want to understand what steps you can take now to protect your family’s position, our specialist private client solicitors are here to help. The earlier you take advice, the more options are available to you.
Please note: This article is for general information purposes only and does not constitute legal advice. It should not be relied upon as a substitute for professional legal advice tailored to your specific circumstances. If you need advice on a legal matter, get in touch with our team.
