Inheriting a property can be a significant moment, one that brings practical responsibilities alongside personal reflection. Whether you’ve inherited a family home or a property you didn’t expect, it’s important to understand what comes next.
If you’re thinking about selling an inherited property, there are a few essential steps to take first. From understanding legal processes like probate to dealing with tax, this guide covers everything you need to know.
What is inherited property?
Inherited property refers to any home, flat, or land passed to you after someone’s death, usually through a will. If there’s no will, the rules of intestacy decide who inherits what. Sometimes, the property is mortgage-free. Other times, it might be tenanted, require repairs, or come with shared ownership.
Before any decisions are made such as putting it on the market, you’ll need the legal right to manage or sell it.
Gaining legal authority to sell
You can’t sell an inherited property until you have the legal right to manage the estate it belongs to. That legal authority comes in one of two forms – a grant of probate or a grant of letters of administration, depending on whether the deceased left a valid will.
If there is a will, the person named as executor applies for a grant of probate. This document confirms their legal right to deal with the estate, including the sale of the property.
If there is no will, a close relative can apply for letters of administration, which serves the same purpose. It gives them the legal authority to manage the estate and carry out tasks like paying off debts or selling the home.
Once either of these documents has been issued, you’re legally allowed to move forward with the sale of the inherited house.
Getting the property ready to sell
Once probate or administration has been granted, the process of selling begins. Start by arranging a valuation to understand the market value of the home. A professional valuation also helps with tax reporting and setting a realistic asking price.
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If the property is unoccupied, it’s important to check that the right insurance cover is in place. Standard home insurance might not apply to empty properties.
Preparing the home for viewings can also help attract interest. That might involve clearing out belongings, completing small repairs, or carrying out a deep clean. Even minor updates can make a big difference in how a property is presented to buyers.
Working with an estate agent who understands the nuances of selling an inherited house ensures that any challenges such as shared ownership or buyer questions about probate, are handled efficiently.
Related: How to sell your property with a short lease?
Taxes on selling inherited property
There are several tax-related considerations to keep in mind when dealing with inherited property.
Inheritance tax may apply if the total value of the deceased’s estate exceeds the current threshold. This tax is usually paid from the estate itself, not by you directly, but it’s something to be aware of as it may influence how quickly a property is sold.
Capital Gains Tax may also be due if the property increases in value between the time, it was inherited and when it’s sold. The tax applies only to the gain, not the full sale price, and is calculated based on the difference between the probate valuation and the eventual sale price.
If you let the home before selling it, any rental income received must be declared to HMRC and may be subject to income tax. These inherited property tax implications should always be reviewed carefully, especially if you’re unsure about your liability.
Exploring alternatives to selling
Selling the home isn’t your only option. If circumstances allow, there are other routes worth considering.
Letting the home as an inherited rental property can offer a regular income, especially in areas with strong demand from tenants. However, this means becoming a landlord and taking on responsibilities like property maintenance, tenant safety, and legal compliance. Any income you earn will need to be declared for tax purposes.
Another option is gifting the property to a family member. In some cases, this may be a way to support younger relatives or help with financial planning. But it’s important to understand inheritance tax gifting property rules, especially if you plan to continue living in the home after gifting it. The seven-year rule may also apply, where the value of the gift could still count towards your estate if you pass away within that period.
What to keep in mind
Selling an inherited property can be a smooth and straightforward process when the right steps are followed. Legal authority is essential, and gaining probate or letters of administration is usually the first requirement. From there, preparing the home, understanding tax liabilities, and exploring whether to sell or rent are all part of the decision-making process.
If you would like expert support, your local Whitegates branch is here to guide you through every stage, whether you’re ready to sell, considering your options, or need advice on inherited property.
