What Does HMRC Mean by “Open Market Value” for Probate?

When someone dies, the person handling their affairs often finds themselves standing in a house full of possessions with no real idea what any of it is worth, at least not in the way HMRC wants it worked out. Is it the figure on the insurance policy? What everything cost when it was bought? What it means to the family now? None of those, as it turns out. HMRC wants one specific number, and once you understand what that number is, the whole task becomes a good deal calmer.

Open market value is the price the goods would reasonably be expected to fetch if sold on the open market at the date of death. That is the test set out in section 160 of the Inheritance Tax Act 1984, and it is the figure every value on the estate account has to trace back to.

The legal definition: s.160 IHTA 1984

This is where the number on the IHT400 comes from, and it is worth reading the wording itself rather than a paraphrase of it. Section 160 says the value of any property is “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.”

That single sentence is the law, and it governs every value entered on the account and its schedules. HMRC restates it word for word in its own Inheritance Tax Manual. The point about not reducing the price simply because everything goes to market at once matters more than it looks: it stops an executor arguing for a discount just because a whole estate is being cleared in one go.

The “willing buyer, willing seller” test

Behind that one sentence sits a hypothetical sale, and this is where the reasoning really lives. HMRC does not imagine a car boot sale or a desperate clear-out. It assumes a sale that is not sudden or forced, between two reasonable parties. In its manual at IHTM09704, it describes a willing seller as “someone who is neither in a rush, nor reluctant, to sell but someone who is prepared to sell if offered a reasonable price”, and a willing buyer as “a prudent person who has the will and money to buy but again is not anxious, nor unduly reluctant, to purchase.”

So neither side is under pressure. The seller is not dumping the goods, and the buyer is not being gouged. The value sits at the sensible price two calm people would settle on.

There is one wrinkle worth understanding, the special buyer. Sometimes a particular person would pay far more than anyone else, perhaps because an item completes their collection or adjoins their land. HMRC does not ignore that. Its manual says that “in some cases there may be a special buyer who is prepared to pay substantially more for an asset than anyone else”, and that “in general you should take account of the special buyer in considering what the market value will be but the market value will be less than what the special buyer is prepared to pay.” In other words, the existence of that one keen buyer nudges the figure up, but the open market value still sits below the top price only they would pay.

The courts have said much the same for decades. In IRC v Gray [1994] STC 360, the leading authority HMRC itself cites, the hypothetical vendor was described as an anonymous but reasonable person who negotiates seriously “without giving the impression of being either over-anxious or unduly reluctant.” It is the same prudent seller HMRC’s manual describes, just in a judge’s words.

What open market value is NOT

Most of the confusion executors run into comes from three honest assumptions, and all three are wrong.

The first is insurance or replacement value, which is almost always too high. An insurance policy is built to replace an item with a new equivalent, not to reflect what a used one would fetch on resale. HMRC warns about this directly in IHTM21041, noting that “a valuation prepared on any other basis may not satisfy the terms of S160, as the value could be more, or less, than the open market value. For example, a valuation ‘for insurance purposes’ using replacement values may include too high a value.” A sofa insured at £1,200 might resell second hand for a small fraction of that, and it is the resale figure HMRC wants.

The second is what the family originally paid. Purchase price tells you nothing about what an item is worth on the day someone died. The third is sentimental value, which has no place in the calculation at all, however much an object mattered.

There is also a trap in the manual worth flagging. A report labelled “for probate purposes” or “for IHT purposes” is not automatically on the right basis. HMRC says as much: “where a valuation is described as being made ‘for probate purposes’ or for ‘IHT purposes’ you may want to confirm with the taxpayer or agent that the open market value has been used.” The label is not the point; the basis is. This is exactly why, when we value jewellery, we work to the s.160 open market standard and say so on the face of the report. If you want that done properly, see our jewellery valuation service. It matters because caseworkers cross-reference insurance schedules, and any single piece worth more than £1,500 has to be listed individually on the IHT407.

Why a real auction sale is HMRC’s best evidence

Having spent years on the rostrum, I can tell you an auction is about the closest thing there is to HMRC’s hypothetical sale made real. A willing seller offers the goods to the whole market. A willing buyer sets the price through open competition. Nobody is forced, nobody is anxious, and the price that emerges is what the item genuinely fetches on the day. That is why HMRC’s manual states that “generally, sales after the death, particularly those at auction, provide the best evidence of the open market value at the date of sale.” Where household goods sell within a reasonable time of death, HMRC may simply accept the actual sale as the value at death.

Now for the mechanics, because this is where executors most often trip up. Take a single lot that hammers at £1,000. The buyer does not pay £1,000. On the confirmed lowest-tier rates as at July 2026, with a 28% buyer’s premium and 20% VAT added to that premium, the buyer’s total outlay is around £1,340. The estate does not receive £1,000 either. After a seller’s commission of roughly 22.5% including VAT, the amount landing in the estate account is around £775. Yet the figure HMRC uses for inheritance tax is neither of those. It is the hammer price, £1,000. As the manual puts it, “the auction sale price is the gross proceeds of sale (or hammer price) before deduction of commission and insurance and without addition of any buyer’s premium.” One number, three outcomes, and only the hammer price goes on the account.

A couple of practical points follow. Where the death and the sale fall on different dates, the taxpayer can either substitute the sale price or argue for an adjustment to reflect market movement between the two, and HMRC may consult its Shares and Assets Valuation team on chattels if the sums are worthwhile. And do not be tempted to knock the selling costs or the valuation fee off the value. HMRC is blunt about this: “you must remember that any costs incurred after the date of death are administration expenses and therefore not deductible.” Those are a matter for the estate accounts, not the valuation.

One insider point that connects the practical to the legal. A sale with a sensible reserve still counts as a willing-seller sale. The reserve is precisely what stops it becoming a forced fire sale, which would fail the willing-seller test. It is the seller behaving prudently, not reluctantly. On the same principle, sets and collections may be grouped as a sensible seller would group them to get the best price. That idea, prudent lotting, comes from Duke of Buccleuch v IRC [1967] 1 AC 506, where the court accepted that “some practical grouping or classification” a prudent seller could carry out without undue effort “may be supposed.” A pair of chairs or a matched service is worth more together than scattered, and HMRC recognises that.

The same logic runs through everything in a house, which is why our house contents valuations are built around real saleroom evidence rather than guesswork. Cars follow the same open market thinking, and we handle those through vehicle valuations too, though auction premiums on motor cars sit on a separate, lower scale.

One caveat on the numbers above: those fee percentages are current auction-house rates as at July 2026 and they change often. Bonhams UK charges 28% on the first tier plus 20% VAT, and Sotheby’s raised its lowest tier to 28% for hammer prices under £1.5m from 13 February 2026. They are market context, not HMRC rules. The hammer-price point stands whatever the fees happen to be.

What if nothing has been sold?

If the items are not sold, how does anyone prove the open market value? You evidence it another way, with a professional valuation prepared explicitly on the s.160 open market basis. HMRC will usually accept one, saying that where the taxpayer “has provided a professional valuation of household goods, which states that it has been prepared on the basis of the open market value” and in the terms of section 160, “you will usually be able to accept it.” The key is that the report says so in plain terms. That is exactly the kind of report we prepare.

A quick note for Scotland and Northern Ireland

In Scotland the grant process is called Confirmation rather than probate, and the terminology around it differs. Inheritance tax and the s.160 open market value test, though, are UK-wide and identical, so the valuation standard does not change from one nation to the next. Only the grant procedure and the words used for it do.

A dated note on the figures (as at July 2026)

A few of the surrounding numbers move, so here they are date-stamped. The nil-rate band is £325,000. The residence nil-rate band is £175,000. The taper threshold, above which the residence band starts to fall away, is £2,000,000. All three are frozen until 5 April 2031, following the Autumn Budget 2025. As GOV.UK puts it, “legislation will be introduced in Finance Bill 2025-26 to fix the NRB, RNRB, and RNRB taper threshold at their current levels until the end of the tax year 2030 to 2031.”

There is also a change coming, not yet in force. From 6 April 2027, most unused defined-contribution pension funds and most lump-sum death benefits are due to be brought into the estate for inheritance tax, with personal representatives responsible for reporting and paying it. That is an announced future change rather than current law, so treat it as pending. As with any moving figure, it is worth checking these against the latest Budget position before relying on them, and the values themselves are entered on the IHT400 account.

When it all feels like too much

If you take one thing from all of this, let it be this: the number HMRC wants is what an item would realistically sell for on the open market at the date of death. Not what it is insured for, not what it cost, and not what it meant to the family. That single idea answers most of the questions an executor loses sleep over.

Valuing an estate on the correct basis is what we do every day, and we know how anxious this part of the job can feel when you are already grieving. If it would help to hand it over, we can prepare a report that states clearly it is on the s.160 open market basis, so it stands up to HMRC scrutiny without you having to second-guess every figure. When you are ready, take a look at our estate valuation service and we will take it from there.