Selling Inherited Property & Capital Gains Tax Guide


Inheriting a home isn’t something that happens every day, so most of us don’t know where to start or what the process involves. Dealing with the loss of a loved one is an emotionally draining time and selling (or renting out) the home on top of this could certainly add to your stress levels. We want to help you navigate the sale of the inherited property in the best way for you and hopefully, this guide to property inheritance will alleviate some of the pressures you’re experiencing.

If you would like to speak to the Good Move team in the meantime, don’t hesitate to get in touch with our expert team who would be happy to advise and discuss your options with you.

Key takeaways

The first step of every inherited property sale or letting process is consulting the will of the person who has passed away. Without this, you’re unable to progress, so start by contacting the relevant solicitors, building society or even the GOV website if you’re unsure of where this legal document is located.

It can be a difficult process to get your head around regarding the legalities that surround inheriting a property. Inheritance Tax, Capital Tax and Income Tax all come into play but there’s a simplified way to navigate tax in your best interest.

The average property sale with an estate agent takes around 150 days, so make note of this if that is your chosen sale method for your inherited property. Account for this in your timescales and plans moving forward.

In this guide:

The different stages of inheriting a property

Around 43% of Brits expect to inherit property from their elder relatives or parents in their lifetime. With this happening to almost half of the UK population, it’s important to know the different stages and what to expect along the way.

The very start of the process involves consulting the will to understand how the deceased person wanted their house to be handled on their behalf. This could be given to one person or distributed in shares. Once you have a copy of the will it should be relatively easy for you to proceed, splitting the shares of the property the way that your loved one intended or taking sole ownership from that point onwards.

What is probate and why do I need it?

The difficulty is when no will was created and, in these cases, probate will need to be completed. Applying for probate means that the nominated person will be granted access to the deceased person’s bank account and assets, as though to now make financial decisions on their behalf. This is one of the very first things you should do when you inherit a property. With probate complete, access to their funds will be granted, their assets will be transferred over, plus any debts and outstanding taxes will need to be settled.

Not everyone needs to apply for probate though, so you must seek legal advice if you inherit a property whether in full or in shares.

Good Move advice: Probate applications take anything between 6 and 12 months. Make sure you factor this into your timescales to avoid any surprises along the way!

Anyone over the age of 18 can apply to be the entitled inheritor of the deceased’s assets, but in the absence of a will, it is typically their closest living relatives that would apply. After that, relatives are most entitled in this order:

  • Husband, wife or civil partner (even if separated)
  • Children (biological or legally adopted, not stepchildren)
  • Grandchildren
  • Great-grandchildren

Ownership transfer

With probate granted, the process of ownership transfer can begin. We suggest seeking support from a solicitor or conveyancer to complete this process because you’ll need to submit the following paperwork, all of which can be found on the GOV website:

Form Why?
AP1 To apply to change the registry of the property
TR1 To transfer a registered property into your name
ID1 To prove your identity for your Land Registry application – this must be signed by a solicitor/conveyancer

Good Move advice: Costs are associated with each one of these applications, so make sure to include this within your budget.

Once you are the legal owner of the property, you can then decide how it is handled going forward. You have multiple options. You could rent the property, which is wise if there is still a mortgage to pay. You could also sell the property entirely if there are no outstanding costs, cutting ties with the house and starting afresh. The sale process can be difficult and does come with lots of terms and conditions, including important taxes to be aware of such as Inheritance Tax and Capital Tax.

Selling the property

If you choose to sell the inherited property, there are a few avenues to explore.

Selling a home by auction is a quick process. You can expect to have the sale completed within a couple of months meaning that any stresses and emotions will be handled quickly. Around 20,000 residential properties are sold by auction each year in the UK.

Sell your home to a cash property buyer for a quick-sale solution. If you don’t wish to have to deal with the property for a long time due to the emotional attachment, Good Move can buy your property in just 14 days, giving you one less thing to worry about at a difficult time.

Selling with an estate agent is a longer process but allows you to receive the maximum amount for the property and allows your home to be marketed widely across the local area. Sales with estate agents are typically much more secure too, so you’re much more like to receive a guaranteed sale.

Selling your home privately, without an estate agent is also an option. You’ll be able to avoid any additional agency fees but it’s worth being aware that there is a lot of admin for you to complete with this route that will need to be managed by you, your joint owners and family/friends.

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Inherited property and tax

When you have inherited a property, there are three taxes need to be on your radar. It’s important to know that these taxes only apply once you have sold or rented the property and if you happen to make any profit.

Inheritance Tax

If the property you inherit is valued below the IHT threshold, then this isn’t something you need to worry about. However, if the house is valued at over £325,000, you are then eligible to pay a 40% Inheritance Tax on any profit that is made from the sale. These figures are locked in place until the 2027/28 tax year.

Capital Gains Tax

If the property you have inherited increases at all from the date you inherit it, this is when Capital Gains Tax could apply. This is more relevant to those people who inherit a property and wait a while before selling it.

The rate announced in the 2024/25 budget was 18%, but this is depending on your income. The annual exempt amount was reduced from £6,000 to £3,000 which means if the increase in the value is below this value, then you won’t owe any Capital Gains Tax.

We have another article that shares more information about taxes needed to be paid on an inherited property, which shares further details about both taxes.

Income Tax

If the property that you have inherited is a buy-to-let or has sitting tenants and you wish to keep it in the same model, you may need to start paying income tax on the profits. Because this property will have then become your second (or third) property, there is additional information with will need to share with the Government to ensure that you’re making all of the correct payments.

How to sell your inherited property fast

To prevent your property sale from getting caught up in a long chain, or to avoid the risk of it not selling at auction and still having fees to pay, one of your best options is to sell your home with a cash-buying property company. The safety net of this option provides you with a definitive timeframe in which the property sale will be completed, meaning you can continue with other aspects of your life at this difficult time.

At Good Move we will provide you with a cash offer within just 24 hours, typically around 85% of the market value, and aim to buy the property in just 14 working days. The speed of this process is best suited to those who don’t have the time or resources to sell the inherited property themselves and wish for the process to be settled efficiently and professionally.

We are the most regulated property-buying company in the industry with acknowledgement from both RICS and NAPB (National Association of Property Buyers) meaning that your loved ones most prized possession will be in safe hands.

Your questions, answered

What if someone currently lives in the property?

If the property is currently occupied, say it is rented, then you have the option to keep the tenants in there and continue to take the rental payments. If you do this, you may have income tax to pay on the money you are making each month. Otherwise, you can serve the tenants with their contracted notice and begin the sale process.

I’ve inherited shares in the property, so what happens next?

For those who aren’t the sole owners of the property, it can be difficult to know what the next steps are. Depending on the shares that are inherited in the property will dictate how much money you will receive in the sale and/or rental.

For example, if you inherit a house valued at £200,000 that is mortgage-free and your shares are 60% but your siblings’ shares are 40%. You would receive £120,000 and your sibling £80,000. This is why it’s important to get your hands on the will and/or probate as soon as possible.

What will it cost to sell my inherited property?

This depends on your chosen route and the value of your property. Whether it’s via auction, a traditional estate agent sale or a private sale, there will always be solicitor fees to be aware of and sometimes agency fees too. We have broken these down in a separate Good Move article – so always factor these costs into the final price. Make sure you have also calculated whether Inheritance Tax or Capital Gains Tax will impact the property you have inherited.

Can I rent out an inherited property?

Yes. This is an efficient way to utilise your inherited property as it allows you to either make a steady income or ensure the mortgage is paid. To convert the home into a rental property, you’ll need to get permission from the mortgage lender if there’s still one in place as well as taking out landlord’s insurance for the property. Being a private landlord can be difficult and quite stressful, so make sure you do thorough research before you embark on this avenue, however, it is a great additional income stream.

Is there a time limit on selling an inherited property?

There is no specific time limit, no. The main thing to be aware of is the probate process which can take up to a year to complete. Without probate in place, nothing can be done with the inherited property, but as for selling it, you can do this as soon or as late after probate is granted as you like. It all depends on what is in the best interest of your situation.

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