What This Guide Covers
- Why more "ordinary" estates are now paying inheritance tax
- How the frozen nil-rate band is pulling more families into the IHT net
- The little-known relief if a probate property sells for less than its valuation
- What executors should do before finalising the estate accounts
More families than ever are finding themselves liable for inheritance tax - not because anyone became wealthier, but because the rules haven't moved while property prices have. If you're administering an estate where the property has now sold for less than the value used on the IHT return, there is a specific, legitimate relief that lets you reclaim the difference. Many executors never hear about it.
Why More "Ordinary" Estates Are Paying Inheritance Tax in 2026
Inheritance tax receipts for April to June 2026 reached £2.3 billion, £96 million higher than the same period the previous year. That increase isn't down to a change in the tax rate - it's down to how many more estates are now being pulled into scope.
The Nil-Rate Band Hasn't Moved Since 2009
The standard nil-rate band has been frozen at £325,000 since 2009, and in the 2025 Budget the Chancellor confirmed it will stay frozen until April 2031. Over that period, average UK property values have risen substantially. The result is what's known as fiscal drag: as the family home increases in value each year, more estates cross a threshold that hasn't moved at all.
The residence nil-rate band - an additional £175,000 allowance when a home passes to children or grandchildren - is also frozen until 2031, and it comes with conditions that catch many families out. It only applies if the property passes to direct descendants, it tapers away entirely once the estate exceeds £2 million, and it isn't available at all in some family structures. An estate that looks comfortably below the threshold on paper can turn out not to qualify for the relief it was relying on.
The Property Is Usually What Tips an Estate Into Tax
In the majority of estates we deal with, the property is by far the largest single asset - often the only one of real value. Its date-of-death valuation, used on the IHT400 return, is what determines whether inheritance tax is due at all, and how much.
That valuation is a snapshot taken at a difficult time, often under time pressure, and property markets move. If the market softens, or the property needs work that only becomes apparent once it's actually marketed, it can end up selling for meaningfully less than the figure HMRC assessed tax on.
The Relief Most Executors Have Never Heard Of
Under the Inheritance Tax Act 1984, there is a specific relief for exactly this situation - commonly referred to as "loss on sale of land" relief. If a property forming part of the estate is sold within four years of the date of death, and it sells for less than the value used to calculate inheritance tax, the executor can make a claim to substitute the actual sale price for the original probate valuation. IHT is then recalculated on the lower figure, and any tax already paid on the difference can be reclaimed from HMRC.
A few conditions matter. The sale must be made by the "appropriate person" - normally the executor or administrator. The claim generally needs to be made within four years of the date of death. If the estate sold more than one property in that period, all of the sales must be aggregated in the claim - you cannot claim the loss on one property while leaving a gain on another out of the calculation. Costs of sale such as agents' fees and legal costs are not deducted in the comparison; it is the gross sale price against the original probate value.
As a simplified example: a property is valued at £450,000 for probate. By the time it is marketed, the local market has softened and it eventually completes at £410,000. Subject to the conditions above, the executor can claim to have inheritance tax recalculated using £410,000 instead of £450,000 - potentially reducing the tax bill by £16,000 at the standard 40% rate on the £40,000 difference, and recovering any overpayment already made.
What Executors Should Do Before - and After - Selling
- Keep clear, dated records of the marketing process and any offers received, particularly if the property needed to be reduced in price to sell.
- Speak to the estate's solicitor or accountant about whether a loss-on-sale claim applies before finalising the estate accounts - the claim has a time limit and cannot be made retrospectively once it has passed.
- Don't assume a lower-than-expected sale price is just bad luck. If inheritance tax was paid based on the original probate valuation, it may be worth revisiting.
The Bottom Line
Frozen thresholds mean more families are paying inheritance tax on the family home than at any point in over a decade - but the rules also include protections for exactly the situation many of those families find themselves in. If a probate property sold for less than it was valued at, it's worth checking whether tax can be reclaimed rather than assuming the valuation was simply the final word. Selling to a cash buyer doesn't affect eligibility for this relief - it's the achieved sale price that counts, and our team can also arrange a free probate solicitor consultation alongside a no-obligation cash offer on the property.