Having to navigate how to sell an inherited property whilst dealing with the loss of a loved one can be extremely difficult. It can feel as though you’re expected to become a tax expert, probate solicitor and conveyancer overnight.
It’s at times like these when having a friend who’s a property expert would come in handy. This is where I come in…
My ultimate guide brings together everything you need to know in order to sell an inherited property.
The six steps to selling an inherited property are:
- Consult the will
- Apply for probate
- Pay Inheritance Tax
- Prepare the property for sale
- Sell the property either via a local estate agent, auction or house buying company
- Pay Capital Gains Tax
I cover the six steps to selling an inherited property in detail below, along with the costs involved in selling an inherited house.
We understand it can be difficult to navigate the sale of an inherited property. That’s why we designed our quiz. It helps you discover alternative ways to sell based on your priorities, property, and more. Click the button below to get started…
Ready to read more? Grab a cup of your favourite brew and let’s go through the steps together…
1. Consult the will
The first step to selling an inherited property is locating the will.
A will is a legal document that sets out a person’s wishes as to how their property, money and possessions (their “estate”) are distributed after their death. You will need this document to find out who is entitled to inherit the property.
Locating a will isn’t always as straight forward as you might think. A good place to start looking (if you have been unable to locate the will among your loved one’s belongings) would be their solicitor, accountant or bank/building society.
The will also sets out who is responsible for distributing the estate to the beneficiaries named in the will. The people responsible for divvying up the estate are known as “executors” (and are sometimes called the “PRs” or “personal representatives”).
1.1 What do you do if there is no will?
If a person passes away without leaving a will, they have died “intestate”. Their estate will pass to certain people according to a set of rules known as the “intestacy rules”.
The list of people who are entitled to inherit a share of an intestate person’s estate is quite limited; only married or civil partners and some other close relatives will be eligible.
The rules of intestacy also apply if a person leaves a will that is later found to be invalid.
If you find yourself in this position, you can find out if you are entitled to a share of your loved one’s estate using the gov.uk resource on intestacy.
2. Apply for probate
The next step to selling an inherited property will be to apply for probate.
The personal representatives will either need to obtain “probate” (if there’s a will) or “letters of administration” (if there’s no will). This document proves the PR’s authority to transfer or sell the property in accordance with the will.
2.1 When don’t you need probate?
You don’t have to read this section if…the assets left in your loved one’s will were all jointly owned. Property held as joint tenants, and bank accounts and life policies owned in joint names will pass to the surviving owner under the right of survivorship.
The co-owner will need to produce the death certificate to formally transfer the assets into their sole name (rather than apply for probate).
Generally, you won’t need to apply for probate if the estate is small, meaning there is less than £5,000 in the bank with no property.
2.2 Who can apply for probate?
The following people can apply for probate:
- Will: the named executors can apply
- No will: the closest living relative can apply
2.3 How do you apply for probate?
To apply for probate, the forms you need to complete will depend on a couple of factors:
- If Inheritance Tax is due (or full details of the value of the estate are needed)
- If your loved one left a will or not
- When your loved one passed away
Click here to download our handy flowchart setting out how to apply for probate.
2.4 How long does the probate application process take?
Once you have submitted your forms, you can expect to receive the grant of probate or letters of administration within 16 weeks.
It can take a little longer if you have applied by post or are required to provide additional information.
Now you have received the grant of probate or letters of administration, you can start dealing with the estate.
3. Pay Inheritance Tax
Generally, you will have to pay Inheritance Tax when a person’s estate is worth more than £325,000 when they pass away.
3.1 What is Inheritance Tax?
Inheritance Tax is a tax on the property, money and possessions (collectively known as the person’s “estate”) of someone who has passed away.
Inheritance Tax is charged on the part of the person’s estate that exceeds the Inheritance Tax threshold.
What is the Inheritance Tax threshold?
The standard Inheritance Tax threshold in the UK is £325,000. This means that if the value of your estate is less than £325,000, there is normally no Inheritance Tax to pay.
Your Inheritance Tax-free threshold can increase from £325,000 to £500,000 where you leave your home to your children or grandchildren. The additional £175,000 is known as the “Residence Nil Rate Band” (RNRB).
What is the Inheritance Tax rate?
The standard Inheritance Tax rate is 40%. If you leave 10% or more of the “net value” of your estate to charity in your will, the Inheritance Tax rate lowers to 36%.
We have set out the various rates and thresholds for you below:
3.2 How do I pay Inheritance Tax?
If you have estimated that Inheritance Tax is due, you will need to:
- Get accurate valuations of the property (and any assets worth over £1,500).
- Complete form IHT400.
- Pay the Inheritance Tax.
The first step is to get an accurate valuation of the property. You can get a property valued by a chartered surveyor or a local estate agent.
Once you have accurate valuations for the estate, you will need to download and complete form IHT400. You will need to send the Inheritance Tax forms to:
HM Revenue and Customs
If you need any help completing the form, you can:
- Read the guidance on how to complete form IHT400
- Call HMRC’s Inheritance Tax helpline – 0300 123 1072
The last step is to pay the Inheritance Tax. You can find out how to pay your Inheritance Tax bill here.
You can opt to pay Inheritance Tax in yearly instalments on certain assets that take time to sell, such as a property.
You might have to pay interest on your instalments if you go with this option. You can use HMRC’s handy interest calculator to work out how much interest is due.
You must make sure you tick the box on form IHT400 if you wish to pay in instalments.
3.3 When do I have to pay Inheritance Tax?
If the estate owes Inheritance Tax, you must start paying tax by the end of the sixth month after your loved one passed away.
What about if I haven’t finished valuing the estate? You can still make a payment before you finish valuing the estate.
You must also send the relevant Inheritance Tax forms to HM Revenue and Customs within 12 months of your loved one passing away.
4. Prepare the property for sale
The best thing you can do with a property to prepare it for viewings is tidy! A clean and tidy property will enable prospective buyers to picture their furniture and themselves living there, rather than focusing on the mess in front of them.
Tidying up will cost you nothing and shouldn’t take too long to run the hoover around. You can always call in those favours your friends owe you to lend a helping hand!
4.1 Should you decorate before selling an inherited property?
Everyone has different taste when it comes to interior design – you might be a Laurence Llewelyn-Bowen fan and adore a feature wall or prefer the Scandinavian minimalist look. Basically, you can’t please everyone and so painting and decorating the property might not necessarily win you any extra buyers. It could just end up costing you time and money.
This is especially true if you decide to sell the property at auction. If you think your inherited property might appeal to investors looking for a doer-upper, it might actually work in your favour if the property looks a little run down. Investors are looking for ways to add value to a property after all.
John Wagstaff, MD at Petty Son & Prestwich, has written a handy article on how to prepare your home for sale: 13 tips for selling property.
5. Sell the property
When it comes to selling an inherited property, you have three options:
- Sell via traditional estate agents.
- Sell by auction.
- Sell to a house buying company.
Want to explore alternative selling methods that are faster & more certain than an estate agent sale? Our free quiz can help guide you in the right direction:
There are advantages and disadvantages to each method. Let’s take a look at the pros and cons below…
5.1 Key advantages and disadvantages
When you are deciding how to sell your inherited house, you need to consider what’s important to you. Is it a speedy sale so you can just move on with your life, or are you keen to get the best price possible?
5.2 Selling your inherited property via an estate agent
If getting the best price possible is important to you, then you should consider selling your inherited property through a local estate agent.
Estate agents are able to get you the best price for your home by doing two main things:
- Getting your property in front of as many buyers as possible
- Negotiating with buyers to get you the highest price
If you decide to go down this route, picking a local estate agent is your best option as they will know the area and will be able to market your property at the correct price.
Try to get a recommendation from a local friend or family member as they will be able to tell you first hand if they were happy with the service they received.
The main disadvantage of selling an inherited property via an estate agent is the time it takes to sell the property. On average, it will take between 3 – 9 months to sell a home with an estate agent.
If you want to sell your inherited property quickly, the next option might be better suited to you…
5.3 Selling your inherited property through a house buying company
Complete this short quiz to find out if selling to a house buying company is the right option for you. If it is, I can introduce you to the house buying company I personally recommend, and the only one I trust.
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How do house-buying companies compare?
Selling your inherited property to a cash house buying company will offer you speed, certainty and convenience.
You can receive a formal offer within 24-48 hours and pick a completion date to suit you. There’s no need for viewings either, so you won’t need Mrs Hinch on speed dial!
The one main disadvantage of selling through a house buying company is the sale price. House buying companies will tend to purchase the property for around 80-85% of the market value.
Here are the main pros and cons of selling an inherited property to a house-buying company:
You should never have to sign a contract when selling through a house buying company. If you are ever asked to sign a contract, then walk away.
5.4 Selling your inherited property at auction
If you are looking for a balance of speed and price, you should consider selling by auction.
Auction is also the best choice if your property has some issues, such as subsidence or being very dated or run down. You may even achieve a higher price when selling a problem property via auction than selling through an estate agent.
At auction, you can typically expect to receive around 90% of the market value of the property.
Selling an inherited house at auction will generally take around 8 weeks from the initial instruction to completion.
If you are selling using a traditional auction house, once the hammer falls contracts are exchanged immediately and the sale is legally binding. You should keep this in mind when setting the reserve price, as there’s no backing out once a sale has been agreed.
If you decide to sell using the “modern auction method”, it might take a little longer to sell but it is possible that you will achieve a slightly higher price.
The main disadvantage of selling at auction is there is no guarantee that your property will sell. If the right buyer is not bidding, you will have to wait another 6-8 weeks for the next auction date.
Wondering if auction is the right fit for your home sale? I've designed this free online quiz to help you answer that very question in the next 1-2 minutes. Click the button below to get started:
5.5 When can you sell an inherited property?
You can only sell an inherited property when probate has been granted (if probate is necessary).
If the property was owned as joint tenants, you don’t need to obtain probate. The property passes automatically to the surviving owner under the “right of survivorship”. In this case, the surviving owner can sell the property whenever they wish.
5.6 Selling an inherited property with a mortgage
If you are selling an inherited property with a mortgage, watch out for early redemption penalties (aka early repayment charges or ERCs).
An early repayment charge is a fee your lender may charge you if you pay off your mortgage before the official mortgage term ends.
6. Pay Capital Gains Tax
The last step to selling an inherited property is to pay any Capital Gains Tax (CGT) that is due.
6.1 Do I have to pay Capital Gains Tax on an inherited property?
You will have to pay CGT on an inherited property if the value of the property has increased from the point it was valued for Inheritance Tax purposes to the point the property was sold. CGT is payable on any profit made, minus any allowable deductions.
6.2 How much CGT will I have to pay on an inherited property?
The CGT rates for residential property vary depending on if you’re a higher rate or basic rate Income Tax payer.
To work out how much CGT you owe, you will need to follow these steps:
- Work out your total gain. This is the value when you sold the property MINUS the value of the property when you inherited it MINUS all costs, including improvements.
- Work out your capital gains allowances and deductions. Everyone has a CGT allowance each year, which is the amount of profit you can make from an asset in a tax year before any CGT is payable. For 2022/23, the CGT allowance is £12,300.
- Work out your taxable gain. This is your total gain (step 1) MINUS your total deductions (step 2).
- Work out your tax rate and multiply by taxable gain. The tax rate is based on your Income Tax bands. You also have a UK Personal Allowance, which is the amount of your income that you don’t pay tax on. In 2022/23, the standard Personal Allowance is £12,570.
If you want to see a full working example of the CGT calculation, read our article on CGT and inherited property here.
You can calculate how much CGT you will have to pay on an inherited property using HMRC’s handy capital gains calculator.
6.3 How do I avoid capital gains tax on inherited property?
You would not pay CGT on the sale of an inherited property if the inherited property was your main home. This is because you are entitled to “private residence relief”.
If you want to avoid paying CGT on an inherited house, one option would be to sell the property quickly. The property value is unlikely to increase drastically if you’re able to sell the property soon after it has been transferred into your name.
6.4 When do I have to pay Capital Gains Tax?
The CGT payment deadline for the 2022-2023 tax year is 60 days from the completion date of the sale.
You will need to submit a “residential property return” and make a payment on account.
What are the costs involved in selling an inherited house?
It is easy to overlook the additional costs involved in selling an inherited house. From probate fees to council tax, the fees can easily start to rack up.
We have set out below the main costs you should consider when selling an inherited house, so you won’t have any nasty surprises come completion day…
What are the initial costs of inheriting a property?
The initial costs of inheriting a property are:
- Property insurance. You should insure the inherited property as soon as possible. The type of insurance policy you’ll need will depend on what you plan on doing with the property, but the most common are unoccupied home insurance, landlord insurance and home insurance.
- Mortgage payments. When you inherit a property with a mortgage, you’ll be responsible for the mortgage payments, even if you don’t live in the property. You should contact the mortgage lender to see if they offer a repayment holiday.
- Utility bills. You should contact each of the providers to let them know that the homeowner has passed away and provide them with up-to-date meter readings. This will avoid you incurring large utility bills when the property is empty.
- Council Tax. You’ll usually have to pay Council Tax on an inherited property, but you should get in touch with your local council as they may offer a discount if the property is unoccupied.
- Property maintenance. It is worth spending a small amount on the property so it doesn’t go into disrepair. An unmaintained house may attract attention from squatters if it’s clear from the outside that the property is empty.
- Travel costs to inspect the property. You may have to inspect the property every couple of weeks as a condition of your unoccupied home insurance. Don’t forget to factor in travel costs, especially if the inherited property is far away from your home.
- Inheritance tax. If the estate owes Inheritance Tax, you must start paying tax by the end of the sixth month after your loved one passed away.
- Income tax. This only applies if you decide to rent the property out and is payable on any taxable profits.
- Application for probate fee. The application fee is £273. If the value of the estate is £5,000 or less, there is no fee.
- Solicitor fees for assisting with the probate process. Solicitors will either charge you an hourly rate or a fee that’s a percentage of the value of the estate.
For more information, read our guide on “What Are The Initial Costs When You Inherit a Property”.
What are the costs of selling an inherited property?
The costs of selling an inherited property are:
- Money spent preparing the property for sale. As we’ve said above, the best thing you can do to prepare a property for viewings is to clean and tidy the house. If you can’t face putting on the rubber gloves, you can always hire a professional cleaner to assist.
- Capital gains tax. You will have to pay CGT on an inherited property if the value of the property has increased from inheritance to the point the property was sold. CGT is payable on any profit made, minus any allowable deductions.
- Estate agent/auction fees. The fees will vary depending on which estate agent or auction house you sell with. Fees are usually either charged as a set rate or a percentage of the selling price.
- Conveyancing fees. Conveyancing fees vary widely but tend to be a fixed fee charged on completion. Remember there will also be disbursements to pay for, such as Land Registry fees for obtaining copies of the title deeds and transferring ownership.
- Energy Performance Certificate (EPC). You have to provide potential buyers with an EPC for the property. You can expect to pay somewhere between £50 and £120.
- Removals company. The price of a removals company will depend on a number of factors, such as the amount of furniture and distance travelled. Which.co.uk have created a useful guide to help you choose the best removals company.
Q1. What happens if I inherit a house with siblings and one of them doesn’t want to sell?
If you inherit a house with siblings and one of them doesn’t want to sell, you have three main options:
- See if your sibling would be willing to purchase your share in the property (aka a “buy out”).
- Rent out the property to your sibling.
- Apply to the court for an “order for sale”.
If you want to find out more, read our article on Inheriting a House With Siblings [Top 4 Questions Answered] here.
Q2. Will I get my benefits back if I sell an inherited property?
Selling an inherited property can affect means-tested benefits, such as Universal Credit. Means testing considers the amount of savings you have to work out if you qualify for certain benefits.
If you sell an inherited property, the money you receive from the sale will probably take your total savings above the £16,000 threshold. You will therefore no longer be entitled to any means-tested benefits with this savings limit.
Q3. Can you sell an inherited property without probate?
You can sell an inherited property without probate if you are the surviving owner, and the property was owned as joint tenants. The property will pass automatically to the surviving owner under the “right of survivorship” rule.
However, if your loved one was the sole owner of the property, or a tenant in common, then you cannot sell the inherited property until probate has been granted.
Read the whole guide but still not sure about the best way to sell your inherited home?
If you prioritise time and peace-of-mind, it might be worth exploring alternative ways to sell your inherited home. Take our free quiz and discover how you can get a faster, more certain sale in less than 2 minutes. Click the button below to get started…
By Matthew Cooper, Co-Founder of Home Selling Expert