Inheriting a property isn’t something that many people consider or fully understand until their loved one passes away. There are many steps to consider, from how it will change your financial standing to how you will clear the home of its contents.
Understanding how to prepare for the process will help make inheriting a house seem less daunting. While you will be faced with the decision of what to do with the property, you won’t have to make an immediate decision in most cases.
The first thing you'll need to do is to obtain a RICS valuation, as this will help you avoid paying more tax liabilities than necessary.
We have created a guide that covers everything regarding inheriting your parent's house in the United Kingdom. From inheritance tax to who makes the decisions on inherited property, we cover everything you need to know.
Inheriting a House from Your Parents in the UK
When an individual’s parents pass away, regardless of whether a will is present, the person’s assets will need to go through a probate process. Probate is a legal process that allows the executor of the will to distribute the deceased person’s property.
They will legally sort through the property, possessions and money of a deceased person. But how long will probate take? The probate process will typically take between 6-12 months to complete. Once probate is complete and the will has been settled you will then own the property. It’s essential to seek legal help and advice to ensure any documentation is completed correctly.
Often, if the property has been left to a child in the will, the process is straightforward. You will need to decide what you want to do with the property and determine what tax obligations you will be required to pay. This includes Inheritance Tax (IHT) which will need to be paid during the probate process. If the inherited property needs to be split between siblings and there is no will it will be split equally based on intestacy rules.
If you inherit a property that still has a mortgage, you will be responsible for keeping up with the mortgage payments. This is unless it is directed otherwise in the deceased's will. If the property was covered under a life insurance policy, then the cost of the mortgage payments will be covered.
If the deceased person doesn’t have a life insurance policy and you can’t cover the mortgage repayments, there are a few things you can do. You can either sell the home, take out a new mortgage or let out the property. It’s useful to note that many banks will offer respites for payments throughout the probate process.
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Selling Inherited Property
Many children opt to sell their deceased parent’s property. This is common if ownership of the property is shared between multiple siblings. In general, the process of selling an inherited property is not too dissimilar to selling an average home. The taxes you pay are generally more complex than this, which is why you should obtain a RICS valuation. This will ensure that you have an accurate property valuation and pay the appropriate amount of tax as a result.
It’s important to note that you only pay Inheritance Tax as part of the probate process. This is not paid again when the property has been sold.
If you are selling a property and looking to use house clearance services, you will need to factor into your probate costs the cost of probate house clearance.
On average, it will cost £400 to clear a medium-sized house after probate. The actual costs will vary based on factors such as:
The size of the home
The number of items being removed
The type of items being disposed of
Additional cleaning or maintenance costs
Additional Costs to Consider When Selling an Inherited Property
When selling an inherited home, you will also be liable to pay the standard taxes and charges that come with selling a home. These include:
Stamp Duty Land Tax (England and Northern Ireland)
Land Transaction Tax (Wales)
Land and Buildings Transaction Tax (Scotland)
Estate agents fees
Conveyancing and disbursement fees
Unoccupied property insurance
Property valuation cost
Mortgage fees
EPC Certificate costs
Removal and house clearance company costs
Any potential home improvement costs
Council Tax (this will apply once the ownership is transferred and probate has been completed, even if you are selling the property)
Probate fees
If the inherited property is a second home, you can expect to have higher charges when it comes to Stamp Duty Land Tax.
For more information read: What is the Cost of Selling a House?
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Do You Have to Pay Capital Gains Tax on Inherited Property?
When you initially inherit the property, you will not need to pay any Capital Gains Tax (CGT). Depending on the value increase from inheriting to selling, you will be required to pay Capital Gains Tax on any profit made. CGT is only relevant if you decide to sell the property and subsequently make a profit on it.
What is Capital Gains Tax?
Capital Gains Tax is a tax related to selling or giving away assets over a certain value. These are more commonly referred to as chargeable assets. Here are the main examples of this:
Selling a property that isn’t your main residence
Selling items that have a value of over £3,000 (with the exclusion of cars)
Properties that have been used for business purposes
Properties that have been let
Assets from businesses
Non PEP or ISA related shares
The exemptions for CGT are if the profit is below £3,000 or £1,500. The previous tax-free allowance for Capital Gains Tax was £6,000. As of April 2024, this was reduced to £3,000. Whether you purchased a second home yourself or it was inherited, you are liable to pay this tax.
Capital Gains Tax is calculated on how much the asset increase is from the date the person died, to when it is sold. For example, if a home costs £200,000 and the property has increased in value to £250,000 when it’s sold, you will need to pay CGT on the profit made. CGT gains are taxable in the year in which the transfer of the capital assets happen.
The percentage costs will vary depending on how much tax you pay. If you pay the basic tax rate you will be charged at 18%. If you are an additional or higher rate tax you will be charged 28% of the profit made on the property.
Cost of Capital Gains Tax
Here is a table of examples of how much Capital Gains Tax you can expect to pay:
| House Value when Inherited | House Value when Sold | Taxable amount over the £3,000 threshold | Capital Gains Tax Paid at 18% | Capital Gains Tax Paid at 28% |
|---|---|---|---|---|
£50,000 | £100,000 | £47,000 | £8,459 | £13,160 |
£120,000 | £180,000 | £57,000 | £10,260 | £15,960 |
£200,000 | £300,000 | £97,000 | £17,460 | £27,160 |
£250,000 | £360,000 | £107,000 | £19,259 | £29,960 |
£325,000 | £520,000 | £167,000 | £30,060 | £46,760 |
(Costs are estimated and based on the basic and higher tax rates with the current tax-free allowance of £3,000)
It’s important to note that any other assets you have inherited will also be taken into consideration for Inheritance and Capital Gains Tax. Even if the property you are selling is only £300,000, if the value of the other assets is £26,000 you will be taxed on anything more than the £325,000 threshold.
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Capital Gains Tax Exemptions
In addition to the £3,000 tax-free allowance, there are a handful of other exemptions regarding Capital Gains Tax. This includes:
You will not be charged CGT if you are gifting assets to a spouse or civil partner
If the home is your main residence
If the money gained is deferred and invested in EIS shares
Business owners can claim ‘entrepreneurs’ relief and will then only have to pay 10% CGT
Some gifts given to trusts are exempt from CGT
Inheritance Tax VS Capital Gains Tax
It’s important to note that Inheritance Tax and Capital Gains Tax are two separate types of taxation. It's uncommon that you will need to pay both on the same asset, but it can occur. Inheritance Tax is paid when you gain possession of property, items, potential pensions and money from someone who has passed away.
How Much Inheritance Tax Do I Need to Pay?
The current tax bracket for Inheritance Tax (IHT) is £325,000. You are only currently required to pay tax on anything of value above this amount. IHT is charged at 40% over this threshold and is unavoidable if you are over the tax boundary. The following table explains how IHT works:
| Value of Property Inherited | Tax-Free Allowance | Taxable Amount | Tax Due |
|---|---|---|---|
| Up to £325,000 | £325,000 | £0 | £0 |
| £326,000 | £325,000 | £1,000 | £400 |
| £400,000 | £325,000 | £75,000 | £30,000 |
| £500,000 | £325,000 | £175,000 | £70,000 |
The personal representative or executor of the will must pay inheritance tax on the value of the deceased's estate before the probate process begins. This includes the value of the property. It will need to be paid within 6 months of the death. Once probate is complete, there is rarely a strict or short deadline for a property to be sold or put into the name of someone else.
There is an additional allowance available where their property is passed to direct descendants. This is called the Residence Nil Rate Band (RNRB). The current allowance for 2025 is £175,000, resulting in a total allowance of £500,000. The following table is the IHT calculation including this allowance:
| Value of Property Inherited | Tax-Free Allowance | Taxable Amount | Tax Due |
|---|---|---|---|
| Up to £500,000 | £500,000 | £0 | £0 |
| £501,000 | £500,000 | £1,000 | £400 |
| £600,000 | £500,000 | £100,000 | £40,000 |
| £750,000 | £500,000 | £250,000 | £100,000 |
The Residence Nil Rate Band (RNRB) can be as much as £1 million if the property is inherited upon the second parent's death, the allowances were unused and they were either married or in a civil partnership.
As shown in the tables above, it's crucial to obtain an accurate valuation of any property within an estate to ensure the correct amount of Inheritance Tax is paid.
Unlike estate agents, RICS-certified surveyors provide independent valuations that reflect the true market value. A RICS valuation is not only unbiased, but also accepted by HMRC, making it one of the most reliable options.
The Office for Budget Responsibility estimates that in 2025, Inheritance Tax will raise around £7.5 billion in revenue.
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Inheriting a House That is Paid Off
If a house has been paid off, no mortgage payments will need to be made by the person who inherits the property. You can simply move into the house once probate has been completed. The executor will need to follow the will closely and distribute the assets accordingly before you can inherit the property.
If you are inheriting a mortgage-free house, the tax-free allowance for Inheritance Tax is higher than if there is a mortgage on the property. Inheritance Tax is then increased to £500,000 if the property is given to children or grandchildren.
If an estate is collectively worth less than £2 million, the threshold can also be increased to £500,000. The children don’t have to be blood relatives, and this allowance extends to step, foster and adopted children.
According to Avant Homes, roughly 28% of the British population own their home outright. This means that there is only a small percentage of homes left to children in wills that are mortgage-free.
What to do When You Inherit a Property
When you inherit a house, there are several things you can do. The option you choose will depend on your individual needs and your personal circumstances.
Live in the Home
You can choose to live in the house yourself. In this case, the home would be your main residence and would not be subject to Capital Gains Tax once it has been sold.
The house will need to be placed into your name and the ownership transferred to you. The executor of the will or the administrator can carry this out by submitting an Assent (AS1) form to the Land Registry. The Grant of Probate will also need to be provided as it shows evidence of who is inheriting the property.
Rent Out the Property
You can rent out the property. This is useful if you already own or rent your own home. It acts as an additional source of income and it means that you don’t have to rush to sell the property if you’re not ready to do so.
If you decide to rent out the residential property you have inherited, you will need to pay Income Tax on any profit you have made over £1000. The income tax you will be liable to pay will depend on the overall profit you are making from the rental income.
Sell The Property
Many children will choose to sell their parent’s property, especially if they have a property of their own and don’t want to rent it out. In this instance, Capital Gains Tax will apply, even if the property was owned outright. It’s important to take out unoccupied property insurance to protect the home while you are going through the selling process. This is if you are not living there.
Fill out our valuation comparison form to compare quotes from RICS-regulated companies and save up to 70% on valuation costs for your inherited property.
Hiring A House Clearance Company
Whether you are looking to move into the home, sell it, or rent it out, you need to take into consideration what you plan to do with any items left in the property. While you can organise items you want to keep and dispose of yourself, this can be a long and daunting process.
This is why many people opt to hire the assistance of a house clearance company. Many clearance companies specialise in probate.
Not only will a house clearance company clear the property for you, but they will do this safely and legally. House clearance companies should be fully covered by Public Liability insurance. They should also have a valid Waste Carrier Licence. This allows them to dispose of unwanted items correctly.
Compare My Move can connect you with up to 6 local house clearance companies. All of the companies we work with have passed our strict verification process.
It’s important to compare quotes so you can find the most suitable company for your needs at a competitive price. Simply fill out our online house clearance form to save up to 70% on your total house clearance costs.
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Find a Valuation Surveyor
When applying for probate you'll need to know the cost of the estate and the property forms part of this. By having accurate figures, you'll pay the correct amount of tax to HMRC if any at all.
Choosing a RICS valuation may result in the quotes being lower than that of an estate agent but it is based on more data and is considered more realistic. Valuation surveyors will look at the size and age of the home, how it was built and the materials used as well as local government zoning.
We only work with RICS-regulated surveyors, ensuring they follow the RICS Red Book Valuation, which is the industry standard for valuations. At Compare My Move, we can connect you with up to 6 valuation surveyors and help you save up to 70% on your Home Valuation costs. Simply fill out our surveying comparison form to get started today. All our surveying partners have passed a strict verification process.
Need a Conveyancer to Sell the Property?
We can also connect you with conveyancers working in your local area. You can save up to 70% on your conveyancing fees by filling out our conveyancing comparison form and comparing up to 6 quotes. All companies must pass our strict verification process to join our partner network and must also be regulated by the following:
- Solicitor Regulation Authority (SRA)
- Council for Licensed Conveyancers (CLC)
- Law Society of Scotland (LSS)
- Law Society Northern Ireland (LSNI)
- Chartered Institute of Legal Executives (CILEX)
