What To Do If You Inherit A Property

There may come a time in your life when you inherit a property. The emotions that you will be dealing with at this time, grief being the primary one, can make deciding what to do with that property a difficult decision. The key thing to remember is that you don’t have to decide immediately – take your time to think through all paths that are open to you. Here are some of the options that you can take (and the pitfalls to watch out for) if you find you have inherited a property and don’t know what you should do with it.

Inheritance Tax

Everyone has heard of inheritance tax, but not everyone is entirely sure what it is all about. It may be that the property you inherit isn’t subject to inheritance tax at all, even if you initially think it would be. The common misunderstanding that comes through inheritance tax is probably due to its name. This is not a tax that the beneficiary has to pay on their inheritance, but rather a tax that the deceased’s estate pays, and only if the property is worth more than £325,000 at current tax levels.

Anything over £325,000 will be taxed at 40 percent, so if the property is sold for £324,999, no inheritance tax will need to be paid. Plus, if the property had been jointly owned and then passed to the surviving spouse, that person would also have inherited their husband or wife’s tax liability, meaning that the limit for inheritance tax rises to £625,000 instead. As you can see, it won’t be all properties that are subject to this tax.

Capital Gains Tax

Capital gains tax is what many people confused with inheritance tax. This tax does need to be paid by the beneficiary, but only when the property is sold. This is the tax due on the difference between the property’s value when you inherited it and what it sells for. If you do want to sell the property and don’t want to pay capital gains tax, it is best to sell it sooner rather than later.

If instead you decide to keep the property and rent it out, don’t forget that you will need to pay tax on the profits you make from being a landlord – although this will depend on any other income you are bringing in. Speaking to an expert who can guide you through the ins and outs of this is the best idea – get the right advice and you can make a wise decision.


It could be that you have inherited a property that has a mortgage still on it. If this is the case, the lender will still require the mortgage to be paid, although many will put those repayments on hold as probate is dealt with. If there is no life insurance policy which will pay off the mortgage, or there is a shortfall, and you do want to keep the property, you will need to renegotiate the terms with the lender. If you are going to rent the property, you will need to change the mortgage to a buy-to-let one instead.


If you already own a property and then you inherit another, you need to let HMRC know which one is your primary residence. You can choose whichever one works best for you, but you need to let HMRC know within two years of your inheritance.