You have inherited a property; now what?
You’ve just inherited a house and want to sell it. This situation can stir up a mix of emotions, from grief to stress about what to do next. Don’t worry – we’re here to help you through this process step by step.
Selling an inherited home isn’t always easy, particularly after losing a loved one. It can become a real struggle if you have an emotional attachment to the property if you lived there.
As the Executor of the deceased’s estate, you must make financial decisions, such as selling or renting out your inherited house. If you sell an inherited property, there may be tax implications too.
Complications often arise when a property is left to siblings, as they might have conflicting priorities.
Table of Contents
I inherited a house. Now what?
When you inherit a property from parents, you must choose whether to sell, rent, or live in it. You might also be required to pay taxes on the property. If you inherit only a part of a property, you must make decisions with any other owners.
The first step in inheriting a property is to establish ownership in your name legally. This process is known as “assenting the vesting,” which involves transferring the title from the previous owner to you, the beneficiary. If the deceased left a valid will, the instructions outlined therein should guide the transfer process. However, without a will, you may need to go through probate, which can be a more intricate legal procedure. Rest assured, we will guide you through each step, ensuring a smooth and efficient transition.
The first step is to obtain a Grant of Probate. This document gives you the legal power to sell the property.
First Things First: Probate
Before you can sell an inherited house, you’ll need to go through probate. This is the legal process of proving a will’s validity and distributing the deceased’s assets. It can take anywhere from a few months to a year, depending on the complexity of the estate.
Top Tip: If you’re struggling with probate, why not get in touch with Property Saviour? We can guide you through the process and even help expedite it once you’ve agreed to sell to us.
Valuing the Property
Once probate is sorted, you’ll need to get the property valued. This is important for two reasons:
- It helps you set a realistic asking price
- It’s needed for inheritance tax purposes
Remember, the value of the property is based on its worth at the date of death, not the current market value.
Dealing with Inheritance Tax
Inheritance tax can be a bit of a headache. In the UK, there’s usually no inheritance tax to pay if:
- The value of the estate is below £325,000
- You leave everything to your spouse, civil partner, or a charity
If the estate’s value is above this threshold, you’ll need to pay inheritance tax at 40% on the amount over £325,000.
Preparing the Property for Sale
Now, let’s get that house ready for potential buyers. Here are some steps to consider:
- Clear out personal belongings
- Give the place a deep clean
- Make any necessary repairs
- Consider minor updates to boost appeal
Choosing How to Sell
You’ve got a few options when it comes to selling your inherited property:
- Estate agent
- Auction
- Private sale
- Property buying company
Each has its pros and cons. For instance, using an estate agent might get you a higher price, but it can take longer. On the other hand, a property buying company like Property Saviour can offer a quick, hassle-free sale within 10 days.
The Selling Process
Once you’ve chosen your selling method, here’s what typically happens:
- Property goes on the market
- Offers come in
- You accept an offer
- Conveyancing process begins
- Contracts are exchanged
- Sale completes
Potential Challenges
Selling an inherited house isn’t always straightforward. You might face issues like:
- Shared inheritance
- Property in poor condition
- Tenants in the property
- Outstanding mortgages or charges
If you’re facing any of these challenges, don’t hesitate to reach out to Property Saviour. We specialise in buying problematic properties and can often find solutions where others can’t.
Ways of inheriting property
There are three primary methods by which you may inherit a property or a portion of it:
1. If the property was held under ‘joint tenancy’, the surviving owner automatically inherits it.
2. If the property was entirely owned by the deceased or jointly owned by multiple owners who have all passed away, the inheritance is determined by the terms outlined in their will(s).
3. If the property was owned as a ‘tenancy in common’, the share belonging to the deceased is inherited according to what is specified in their will.
In situations where there is no will and the property was not held in joint tenancy, the inheritance is determined by the laws of intestacy.
What to do with inherited property: Keep, Rent, or Sell?
Ah, so you’ve made it through the legal maze of inheriting a property – well done, you! But now comes the big question: what are you going to do with this place?
Let me lay out your options for you. First up, you could turn this inherited house into your very own home sweet home. Imagine putting your personal stamp on it, making it truly yours. You’d never have to worry about a landlord breathing down your neck again!
Or, if you’re feeling a bit entrepreneurial, you could turn this property into a cash cow by renting it out. Just think of that steady stream of rental income flowing into your bank account month after month. You’d be sitting pretty, let me tell you.
But maybe you’re more of a “one and done” type of person. In that case, you could always just sell the place and cash in on the market conditions. A nice little windfall to treat yourself or invest in something else entirely.
Whichever route you choose, just know that it’s your call to make. This inherited property is your blank canvas to paint however you see fit. Want to turn it into your dream home? Go for it! Fancy yourself as a landlord extraordinaire? The world is your oyster! Or if you’d rather take the money and run, hey, no judgment here.
The point is, you’ve got options, my friend. And whichever one you pick, make sure it feels right for you. This is your chance to make this inherited property work for your life, not the other way around. So take a deep breath, weigh the pros and cons, and then dive right in – the future is yours for the taking!
Tax & other debts on inherited property
Regardless of the ownership structure, the portion of the property owned by the deceased is included in their estate for valuation purposes.
The appointed personal representative or executor of the deceased’s estate is tasked with managing the estate and settling financial obligations. Their responsibilities include ensuring all debts and taxes are paid before distributing any remaining assets.
Should you choose to either sell or rent out a property you’ve inherited, be aware that you might have to pay tax on the income from rent or any profit from the sale.
If you already own a home and decide to keep the inherited property as a second residence, you must designate which of the two will be your primary residence and inform your tax office accordingly. This is important because only your main home qualifies for capital gains tax relief.
Understanding Inheritance Tax Implications
One of the primary concerns when inheriting a property is the potential tax liability. However, it’s important to note that inheriting a property does not automatically trigger a significant tax burden. The inheritance tax threshold in the UK currently stands at £325,000, and your tax liability will depend on the value of the estate and your relationship to the deceased.
- Inheritance tax. If the total value of the deceased’s estate—which includes the property, savings, shares, and other assets—exceeds £325,000, inheritance tax is generally due unless specific exemptions apply.
- Capital gains tax. You may need to pay capital gains tax if you decide to sell the inherited property.
- Income tax. If the property you inherit is a buy-to-let or a holiday let, you will be liable for income tax on any rental income you receive.
Addressing Existing Mortgage
Inheriting a house with an existing mortgage adds complexity, particularly in sorting out the mortgage details. Sometimes, the deceased might have had life insurance covering the mortgage balance.
If there is no life insurance to cover the mortgage, it’s important to understand the lender’s expectations. Review the mortgage terms to find out what happens after the mortgage holder’s death. Often, mortgage payments are paused until the probate process is completed, but be aware that interest might still accumulate during this time.
You have several options available, including taking over the existing mortgage payments, paying off the mortgage in full, or refinancing the property under your name.
Little known loophole of inheritance tax on inherited property
Inheriting property and other assets often involves paying inheritance tax if the deceased’s total estate exceeds £325,000. For any value above this threshold, a 40% tax rate is applicable. However, there’s a significant relief for those inheriting a main residence from parents or grandparents, which can reduce the inheritance tax burden.
For the tax year 2024/25, an additional allowance of £175,000 is available for main residences passed down to direct descendants. This is on top of the standard £325,000 nil-rate band, potentially allowing a property worth up to £500,000 to be inherited without incurring inheritance tax.
Inheritance from a deceased spouse or civil partner is exempt from inheritance tax, and any unused tax allowances can be transferred to the surviving spouse or civil partner. This means if a parent or grandparent has passed away and didn’t use their full inheritance tax allowance, the remaining allowance could benefit future inheritances. For instance, if both parents have passed away and the first transferred all assets to the surviving spouse, the children or grandchildren could inherit property valued up to £1,000,000 tax-free.
The table below demonstrates how the combined allowances can significantly increase the value of tax-free inheritance:
| Tax year | Nil-rate band (£) | Residence nil rate band (£) | Total for individuals (£) | Total for couples (£) |
| 2024/2025 | 325,000 | 175,000 | 500,000 | 1,000,000 |
Capital gains tax on inherited property
When you inherit a property, you’ll only face capital gains tax if you sell it. Should the property’s value have increased since you inherited it, the tax might apply to the profit made from that increase.
Capital gains tax is charged at 18% for basic-rate income taxpayers on gains made from residential properties. For those in higher or additional tax brackets, the rate is 24% starting from April 2024.
Each individual also receives an annual capital gains tax allowance, which for the tax year 2024/2025 is £3,000. This allowance is the amount of profit you can earn from selling taxable assets, including non-primary residence properties before any capital gains tax is applied.
If your profit on an inherited property is below £3,000, you won’t need to pay any capital gains tax, provided you haven’t already used up your annual allowance.
If you make the property your main residence, you won’t have to pay capital gains tax on the sale.
Do you pay stamp duty on inherited property?
You do not have to pay stamp duty on inherited properties. Stamp duty is only applicable when purchasing a property. However, other taxes such as inheritance tax might be required, depending on the estate’s value.
Inheriting a property with someone living in it
When you inherit a share of a property and another owner is currently residing there, you need to discuss whether they will continue to live there and under what conditions or if the property should be sold. Their right to remain may already be determined by the will.
If you inherit a property that is being rented out, you take on certain responsibilities as a landlord. It’s important to respect the tenant’s legal rights should you decide to sell the property.
Can I buy out another beneficiary?
Yes, it is possible for one beneficiary to buy out the other beneficiaries’ shares of an inherited property. The situation can get complicated if a beneficiary lives at an inherited home.
Here are some key points on how to go about buying out other beneficiaries:
Getting the Property Valued
- The first step is to get the inherited property professionally appraised to determine its fair market value. This valuation ensures all beneficiaries receive an equitable payout.
- The valuation will help you calculate how much you need to pay the other beneficiaries for their shares if you want to buy them out.
Reaching an Agreement
- Have an open discussion with the other beneficiaries to see if they are amenable to selling their shares to you. Never assume their intentions.
- If they agree to sell, you can pay them in cash for their shares if you have the funds available. They would then sign over their portion of the deed to you.
- If you don’t have sufficient cash, you’ll need to secure financing, such as a mortgage, to buy out the other beneficiaries.
Handling the Buyout
- Work with a solicitor to properly document and execute the buyout agreement with the other beneficiaries.
- After buying the others’ shares, you may need to go through an equity transfer process with a solicitor to transfer ownership to your name officially. While registration isn’t mandatory unless the property is sold or mortgaged, it does provide the strongest proof of ownership and simplifies future transactions involving the property.
- Consider getting independent financial/legal advice, as buying out siblings can have tax and legal implications that need to be accounted for.
Taking on mortgage payments
If you inherit a property that still has a mortgage, you will be responsible for making the monthly payments, regardless of whether you live there or not. Failure to keep up with the payments may lead to the property being repossessed and sold to cover the mortgage debt.
If you are concerned about making mortgage payments, speak with your lender.
Renting out
Firstly, landlords in England have significant legal obligations. These include ensuring the property is safe and habitable, maintaining the structure and systems, conducting regular safety checks (gas, electrical, fire), and complying with energy efficiency standards. Additionally, landlords must protect tenants’ deposits, perform right to rent checks, and adhere to licensing requirements where applicable.
Financial considerations are equally important. While rental income can be attractive, it’s subject to taxation, potentially up to 45% depending on your tax bracket. Ongoing expenses such as maintenance, insurance, and possibly mortgage payments can significantly erode profits.
Managing a rental property can be time-consuming and stressful, especially for those new to property management. Dealing with tenant issues, coordinating repairs, and keeping up with changing regulations are ongoing responsibilities that require dedication and expertise.
Given these challenges, selling an inherited property often emerges as a more attractive option. It provides immediate financial benefit, potential tax efficiency if sold soon after inheritance, and eliminates the ongoing responsibilities of property ownership. At Property Saviour, we specialise in providing quick, hassle-free solutions for inherited properties, offering fast cash purchases and assistance with legal processes. This approach allows individuals to capitalise on their property’s value without the complexities of becoming a landlord.
If you inherit a property in a trust
A trust is a method for holding and managing assets, such as money or property, on behalf of individuals who might not be ready or able to handle it themselves. When you receive property through a trust, you are known as the ‘beneficiary’.
The ‘trustee’ is the person who legally owns the property on paper. They must handle the property according to the instructions left by the person who has passed away, as specified in their will.
Can I sell a house straight away if I inherit it?
You’ll need a Grant of Probate to sell the family home however, you can agree to sell it to a cash house buyer and complete as soon as you have official paperwork.
What happens if I sell an inherited property?
Depending on resale value, you may have to pay capital gains tax and inheritance tax on inherited property. It is always best to get professional advice from a qualified accountant.
Capital gains tax is calculated if the property value has risen from the date of inheritance to the resale date.
From ‘Help!’ to ‘Sold!’: Property Saviour’s Quick-Sale Magic
Selling your home through traditional methods can be a frustrating experience. Estate agents often promise the world but deliver disappointment, with lengthy delays, endless viewings, and the constant threat of buyers pulling out at the last minute. Auctions might seem like a quick fix, but they come with their own set of headaches – hefty fees, a limited pool of buyers, and the risk of your property selling for far less than you’d hoped.
Enter Property Saviour, your knight in shining armour in the world of property sales. We offer a refreshingly straightforward approach – no fuss, no hidden costs, just a fair cash offer and a guaranteed completion date. Our team understands the stress of selling a home and we’re here to take that burden off your shoulders. With Property Saviour, you can wave goodbye to the uncertainty and endless waiting that comes with traditional selling methods.
Why not take the first step towards a hassle-free sale? Request a call back from our friendly team today. We’re ready to listen to your needs and offer a solution tailored to your unique situation. Don’t let your property become a millstone around your neck – let Property Saviour show you how easy selling your home can be.
Property Saviour Price Promise
- The price we’ll offer is the price that you will receive with no hidden deductions.
- Be careful with ‘cash buyers’ who require a valuation needed for a mortgage or bridging loan.
- These valuations or surveys result in delays and price reductions later on.
- We are cash buyers. There are no surveys.
- We always provide proof of funds with every formal offer issued.
We'll Pay £1,500 Towards Your Legal Fees
- No long exclusivity agreement to sign because we are the buyers.
- You are welcome to use your own solicitor.
- If you don’t have one, we can ask our solicitors for recommendations.
- We share our solicitor’s details and issue a Memorandum of Sale.
Sell With Certainty & Speed
- Our approach is transparent and ethical, which is why sellers trust us.
- 100% Discretion guaranteed.
- If you have another buyer, you can put us in a contracts race to see who completes first.
- Complete in 10 days or at a timescale that works for you. You are in control.
