Valuing stocks and shares
Listed shares are shares in public companies that trade on the London Stock Exchange or on another recognised stock exchange either in the UK or abroad.
Professional valuation of listed shares
If the deceased person had a stockbroker or a fund manager you should inform them of the death and request a probate valuation (or confirmation valuation in Scotland) as at the date of death.
They will charge a fee for this service although this can be deducted from the valuation.
Valuing listed shares yourself
You can always compile the valuation of listed shares yourself. The starting point is to compile a list of the shareholdings from the individual share certificates which may be stored at the deceased person’s house, with their solicitor, accountant or with their bank.
Checking share prices is now much easier with the advent of the internet. You can access the stock exchanges websites, for example, the Stock Exchange Daily Official List
We suggest that if the deceased person owned a large portfolio of shares you should consider using a professional valuer. You can find a stockbroker on the London Stock Exchange website.
Using the closing price on date of death
The value of shares is taken as the closing price on the day the deceased person died.
If the stock exchange was closed that day then you can use the closing price on either the last day the stock exchange was open before the person died or the first day the stock exchange was open afterwards.
For example, if the death took place on a Sunday you can choose either the closing price on the previous Friday or on the Monday after; whichever price is the lower.
Calculating the value of a shareholding
To value a shareholding you will need to multiply the number of shares owned by the price per share.
For example, If the deceased person owned 1,000 shares and the closing price on the day was 236p then the value of the shareholding would be £2,360.
Using the quarter up price
You may find that instead of a single closing price for a share you see you a range of two prices. This is called the ‘spread’ on a share price and shows a lower ‘bid’ price at which someone wanting to sell the stock receives and a higher ‘offer’ price at which someone want to buy the stock pays. In this case, you will need to calculate the ‘quarter up’ price and use this as your valuation.
For example, if the range shown on the share is 236p – 246p and the shareholding is 1,000 shares, then the calculation of the quarter up price is as follows:
– Calculate the difference between the two prices: 236p – 246p which is 10p
– Then calculate a quarter of the difference between the two prices: 10p times 0.25 which is 2.5p
– Simply add 2.5p to the lower price in the range giving 238.5p. This is the quarter up price
– For the total value of the shareholding, multiply the quarter up price by the number of shares owned
– If a 1,000 shares were owned, the value for the shareholding would be £2,385
Companies may make a bonus payment to their shareholders once or twice a year. This payment is made usually in the form of cash but may also be offered as additional shares in the company (called a ‘scrip payment).
If a dividend was due when the person died, this needs to be included in the value of the shares. The dividend will be indicated by one of a series of markings (for example, ‘xd’, ‘xc’, ‘xr’ or ‘xe’) next to the quoted share price in the financial website or newspaper.
The dividend will usually be given as a cash amount and will be shown on a ‘per share’ basis so to calculate the full amount you will need to multiply the bonus shown by the total number of shares held.
Alternatively, the figure for the dividend may be given as a percentage. This will be a percentage of the nominal or ‘face value’ of the share. You will need to check the share certificate to find out the nominal value of the shares. Once ascertained, you will need to multiply the amount of the dividend by the total number of shares to calculate the total size of the bonus.
In calculating a dividend, the ‘net’ price should be used. This means after income tax has been deducted. Financial websites and newspapers will show the net price for UK companies but will show the ‘gross’ price for overseas companies.
Valuing dividends can be complicated and if you are in any doubt we suggest you seek a professional valuation.
Valuing interest payments
Some shares calculate interest on a daily basis but only pay it once or twice a year. You will be able to identify these as they will have a marking of either ‘im’ or ‘ik’ next to the quoted share price.
You will need to calculate the value of the interest due from the date of the last payment to the date of death. You will know when the payment date has been declared as the marking next to the share price will change to ‘im…x’ or ‘ik…x’.
If the person died after the interest payment has been declared but before it was made then you will need to deduct the net interest from the date the person died to the date of the payment.
As with dividends, valuing interest payments can be complicated and if you are in any doubt we suggest you seek a professional valuation.
Valuing ISA, PEPs, TESSAs
The deceased person may have held ISAs (Individual Savings accounts), PEPs (Personal Equity Plans) and TESSAs (Tax Exempt Special Savings Accounts). In each case, you should request a valuation from the fund management company looking after these investments.
As with other listed shares, shares held in these accounts should be valued using the closing prices on the date of death.
Valuing unit trusts
You may find it difficult to value a unit trust as the price may not be readily available on a financial website or in a newspaper. You will need to contact the fund manager of the unit trust.
HM Revenue & Customs confirms that if two prices are given you should use the lower of the two for your valuation.
Missing share certificates for listed companies
Most companies listed on a stock exchange no longer automatically issue share certificates but use electronic systems to manage their share registers. This makes finding missing shareholdings much easier.
If you think that the deceased person owned shares but can’t find the share certificates or evidence of ownership then you should contact their stockbroker, solicitor or accountant. If an accountant was preparing the deceased’s annual tax return their records should include details of shares owned.
If you believe that shares were held in a specific listed company then you should contact the registrar of that company.
Valuing government bonds
A government bond is a debt security issued by a national government, which will usually pay periodic interest payments and repay the face value of the security on the stated maturity date.
In the UK, the generic term for bonds issued by the government is ‘gilts’ and covers almost all government bonds and index-linked debt instruments. The term originates from the first ownership certificates which had gilded edges.
As with listed shares, the value of gilts is taken as the closing price on the day the person died.
For a free valuation, you should contact Computershare at the UK Debt Management Office. Computershare is the private company which administers the government’s sale and purchase of gilts and maintains the ownership register. They will need to see a copy of the death certificate in order to give you a valuation.
Valuing unlisted shares
Unlisted shares are shares in private companies that are not traded on a recognised stock exchange and not offered sale to the public.
To value these shares you should contact the company secretary or the accountant at the company to request a valuation.
HM Revenue & Customs notes that a valuation should be based on the value of the company’s assets, the size and rights ascribing to the deceased person’s shareholding, the amount of dividends the company pays and general economic conditions at the time of the death.
Undervaluing or overvaluing shares
If you realise, before you apply for probate (confirmation in Scotland), that your valuation is too low, for example, you find more shareholdings then you must inform the Probate and Inheritance Tax Helpline.
On the other hand, you may be entitled to relief if within one year of the date of death you sell shares for less than the value on which you paid Inheritance Tax.
To claim, you will need to use Form IHT35 ‘Claim for relief – loss on sales of shares.’
Please note that information which we provide through Lasting Post is in outline for information or educational purposes only. The information is not a substitute for the professional judgment of a solicitor, accountant or other professional adviser. We cannot guarantee that information provided by Lasting Post will meet your individual needs, as this will very much depend on your individual circumstances. You should therefore use the information only as a starting point for your enquiries.