Valuing a business for probate means establishing the price the deceased's business interest might reasonably have fetched on the open market at the date of death, then reporting that figure to HM Revenue and Customs. It is one line in the estate, but often the hardest to get right, because a private business has no share price to point to.
This guide sets out how to value each type of business, which method fits, the documents and forms HMRC expects, and the 2026 Business Property Relief rules that many older guides still get wrong. Figures are current as at August 2026 and are subject to change.
What does valuing a business for probate actually mean?
For probate, a business is valued at its open market value on the date of death: the price a willing buyer would have paid a willing seller on that day, with neither under pressure to trade. This is the same "open market value" standard HMRC applies to every asset in an estate (gov.uk, as at August 2026, subject to change).
The date matters. You are valuing the business as it stood on the day the owner died, not what it later sold for or what it was worth a year before. Trading may have depended on that person, and a value that ignores their loss can be challenged.
Executors are personally responsible for the figures on the estate account. You are entitled to take proper professional advice, usually from an accountant or a specialist valuer, and pay for it from the estate. That gives a defensible figure and a paper trail if HMRC asks questions.
How do you value each type of business?
The route depends on how the business was owned. A sole trade, a partnership share and shares in a private limited company are valued in different ways and reported differently. The table below sets out what forms the value and what HMRC will want for each.
| Business type | What you are valuing | Typical basis |
|---|---|---|
| Sole trader | The trade and its assets, minus its liabilities: premises, equipment, stock, cash and any goodwill, less business debts owed at death. | Usually asset-based, plus goodwill where the trade has value beyond its assets. |
| Partnership share | The deceased's share of the partnership's net assets and profits, as set by the partnership agreement or the Partnership Act 1890. | The agreement often fixes how a share is valued; otherwise a proportion of net assets and goodwill. |
| Limited company shares | The value of the deceased's shareholding, not the whole company. A minority holding is usually worth less per share than a controlling one. | Income or earnings based for a trading company, with a discount for a minority or hard-to-sell holding. |
General positions only. Every business differs, and a valuer will apply the facts. Source: gov.uk, as at August 2026, subject to change.
Which valuation method should you use?
Three methods are used to value a business for probate. Which one fits depends on whether the business trades on, holds mostly assets, or can be compared to recent sales. A valuer may use more than one and cross-check them.
- Asset-based. Add up what the business owns, at date-of-death market value rather than book value, and take off what it owes. It suits property-heavy or asset-holding businesses, and sets a floor for most others.
- Income or earnings based. Value the business on the profits it can be expected to produce, often as a multiple of sustainable earnings. It suits a trading company or firm that will keep running after the death.
- Market based. Compare the business to similar ones recently sold. It works only where genuine comparable sales exist, which is uncommon for small private businesses.
Goodwill, the value of a business beyond its physical assets, sits inside these methods rather than beside them. If the goodwill depended heavily on the person who died, it may be worth little once they are gone.
What documents and forms does HMRC need?
To value and report a business, gather its recent financial records and, where business relief applies, complete the right HMRC forms alongside the main estate account. Assemble the papers before you fix a figure, so the value rests on evidence.
- The last three years of accounts. HMRC will generally expect the business accounts for the three years up to the date of death, so it can see the trading pattern, not a single year.
- A balance sheet at the date of death. A statement of assets and liabilities as at the day of death, which may differ from the last year-end figures.
- Form IHT400. The full inheritance tax account, used where the estate is taxable or includes assets such as a business (gov.uk).
- Form IHT413. Business and partnership interests and assets, filed with IHT400 where the deceased owned a business, a share in one, or shares in a company, and you are claiming business relief (gov.uk).
Where the business owns land or premises, the property element is valued on the same open market basis and may be reported separately. Keep the valuer's report and your working papers with the estate file.
Does Business Property Relief reduce the inheritance tax?
Business Property Relief (BPR) can cut the inheritance tax on a qualifying business, but the rules changed from 6 April 2026. Relief is now 100% on the first £2,500,000 of qualifying business and agricultural assets per person, and 50% on the value above that. The £2,500,000 allowance is transferable between spouses and civil partners, up to £5,000,000 for a couple (gov.uk, as at August 2026, subject to change).
This replaced the earlier position under which qualifying businesses could receive unlimited 100% relief, and many pages written before December 2025 still quote a £1,000,000 cap that is not the current rule. To qualify, the business generally must be trading rather than mainly holding investments, and must usually have been owned for at least two years before death.
You still value the business first and claim the relief second on form IHT413. Where the whole interest qualifies for 100% relief within the allowance, there may be no inheritance tax on it, but the value is still reported. Any inheritance tax due on the estate is charged at 40% above the available nil-rate band of £325,000. Business relief can be complex, and it is an area where advice often pays for itself. See our inheritance tax guide for how the wider thresholds work.
What do executors get wrong when valuing a business?
Most probate business valuations that unravel share the same few errors: using book value, ignoring the person who has died, and treating a part share as if it were the whole. Knowing them upfront saves a later correction and possible penalty.
- Using book value instead of market value. Accounts often carry premises and equipment at cost less depreciation, which can sit well below or above real date-of-death value.
- Ignoring the loss of the owner. If profits and goodwill rested on the deceased, valuing the business as if they were still there can overstate it.
- Valuing a minority holding as a slice of the whole. A 20% shareholding is not simply 20% of the company; a minority discount usually applies.
- Forgetting money the business owes or is owed. Director's loans, overdrafts and unpaid invoices at the date of death all move the figure.
- Assuming relief means no valuation. Even where Business Property Relief covers the tax, HMRC still expects a supported value on IHT413.
How does HMRC check a business valuation?
HMRC does not accept business figures at face value. Unquoted shares and business interests are usually reviewed by its Shares and Assets Valuation (SAV) team, while any land or premises is tested by the Valuation Office Agency (VOA). Both compare your figure against the evidence and can open an enquiry.
A supported, professionally prepared valuation is the best protection. If HMRC disagrees, it may negotiate a revised figure, which can change the tax due. Executors who used book value or a rushed estimate can face additional tax and, in some cases, a penalty, which is why a documented open market valuation matters. Our guide to probate explains where valuation sits in the wider process.
Frequently asked questions
How do you value a small business for probate?
You value a small business for probate at its open market value on the date of death: what a willing buyer would have paid on that day. For a sole trade this is usually the assets less liabilities plus any goodwill; for company shares it is the value of the holding, often with a minority discount. An accountant or specialist valuer can prepare a supported figure, paid from the estate.
Who can value a business for probate?
There is no legal requirement to use a named professional, but an accountant experienced in probate work or a specialist business valuer is usual, because the value must stand up to HMRC. Executors are entitled to take proper advice at the estate's expense. A documented valuation gives a defensible figure and reduces the executor's personal risk if HMRC queries it.
Is goodwill included when valuing a business for probate?
Yes, goodwill is included where the business is worth more than its physical assets, for example an established customer base or reputation. It is captured within the valuation method rather than added separately. Where the goodwill depended mainly on the person who died, it may be worth little once they are gone, and a valuer will reflect that on the date of death.
Do you pay inheritance tax on a business?
You may, but Business Property Relief can reduce or remove it on a qualifying trading business. From 6 April 2026, relief is 100% on the first £2,500,000 of qualifying assets per person and 50% above that, transferable up to £5,000,000 for a couple (gov.uk, subject to change). The business is still valued and reported on form IHT413 even where relief covers the tax.
What happens if you undervalue a business for probate?
If HMRC's Shares and Assets Valuation team finds the figure too low, it can require a revised value, which may increase the inheritance tax due. Where the undervaluation was careless, executors can face a penalty on top of the extra tax. A professionally prepared open market valuation, kept on file, is the main way to avoid this.