Selling an Inherited Property – a Quick Guide
We have updated our guide in 2021 to include the latest information to help you with selling an inherited house and associated issues.
Declaring probate – This is the very first thing that will need to happen. It’s part of a proper process and a solicitor may be required
Tax – There are a variety of taxes that can be implicated from council tax to capital gains tax.
Mortgage – It might be paid off but there might also be a term for payment after death.
Insurance & next steps – What do you plan on doing with the property? Rent it out, sell it or have some space to think, insurance can impact all of these.
Three types of inherited property tax
- Inheritance tax
- Capital Gains Tax
Inheritance tax
If and when you inherit a property you will be required to pay an inheritance tax. It will be the total value of the estate (the property) up to a threshold of £325,000. This means there is no take up to that number and after £325k you’ll be taxed.
You can leave everything above the threshold to your spouse, civil partner, a charity or a community amateur sports club. You’ll need to report the inheritance even if below the amount and if you are leaving a property to children the amount is increased to half a million pounds, this can also be doubled if you leave the property to your spouse or civil partner and they then pass it onto children on their death. You can read more on the government’s website.
The current inheritance tax rate is set at 40% but this is only above the £325,000 tax-free threshold e.g. if the property is worth £500,000 you would only pay the 40% on £175,000. Inheritance tax can be reduced if you leave some net value to charity. Tax relief can also be gained via business rates or in some cases if gifts are given whilst you are still alive though if it’s within 7 years of death it still may require tax.
Who pays the tax?
You may be required to also pay Capital gains tax.
Pay inheritance tax
Sometimes you may be required to pay inheritance tax, this can be if e.g. a trust runs out of money or debt is accrued on the deceased’s estate, the best way to do this is via the gov website.
You will need to pay inheritance tax by the sixth money of a person’s death, if you’ve overpaid it will be refunded and sometimes it can be claimed back against the value of the estate so it can really depend on a number of circumstances.
Capital gains tax
If you’ve inherited a property and you decided to sell it at a later date, the price (of the house) might go up and in this event, you’ll be required to pay capital gains tax. For example, if you inherited a property at £100,000 and the price increases to £125,000 you’ll be required to pay capital gains tax on £25,000.
You can offset some of this on fees when selling the property (like estate agent fees etc.) as well as selected home improvements.
Due to the number of variables on capital gains tax it can be a complex issue and might be worth getting specialists involved as you can look at factors from your personal tax allowance to any number of other issues that may affect it.
If you wanted to calculate the capital gains you may be required we highly recommend the capital gains tax calculator of the HMRC website. You should have the following details ready to help with calculating the CGT are:
- When you sold your property
- What you sold it for – was it less than it was worth?
- What the property was worth when sold
- The price you paid in costs when you stopped owning the property
- How much the property was worth when you inherited it
- How much money you’ve spent on improving the property
Pay capital gains tax
You’ll need to ensure you know how much you are due to pay first, you can use the calculator (we’ve linked to above) to ensure you know. You can then report your capital gains tax online to HMRC. Once you have done this HMRC will send you a reference number and you will be able to pay the tax, this can be done a few ways from bank transfer to cheque, it’s worth looking on the gov website to see which way will suit you best.
Avoiding capital gains tax
There are a couple of ways to avoid capital gains tax
- If the property is your main residence and you do not own any other properties you are able to claim private redicence relief
- Sell it as soon as it is inherited – capital gains tax is based on the increase in value over time, if it is sold right away you do not need to worry about the tax. A property buying company like us can help with this in a quick and efficient manner with the least amount of hassle.
Income Tax
You will need to declare this income (and pay income tax)and whilst you might be able to expense come to reduce the amount you are tax you should read more info on the government’s guide to renting our properties.
The ultimate guide to selling an inherited property
We’ve covered some of the basics of selling a probate property but if you wanted a more complete guide we’ve created this guide to help you every step of the way in the probate process.
If you have more questions you should get in touch and we would be more than happy to help with ensuring you feel fully informed.
Will
Check if there is a will, it should be the first thing you’ll need to check to see if there are any names associated to the property, it may also detail any wishes the deceased had like if they wanted their estate to be divided up.
The will, will also help you get in touch with anyone on the will and also enable you to start the probate application process. You can search the national will website and it may help it get tracked down for a small fee. If you’re finding it difficult the probate helpline may be able to help, It is open Monday to Friday: 9 am to 5 pm excluding public holidays.
If the deceased did not leave a will you will need to seek professional advice usually, this is a specialist solicitor. You’ll need to ensure you have legal authority if you are thinking of selling an inherited property.
Having a will or not actually doesn’t matter with regard to probate, probate will always be required on any property valued at more than £50,000. UK banks have limited on how much they will release upon probate.
Note you can check Intestacy Rules to see what to do if there is no known will.
Apply for probate
The probate process is the (legal) term for when you start to arrange and draw up a list of all the financial assets of a deceased person from estates to shares etc. The aim is to give the person or people who may be entitled to deal with the deceased’s assets and estate. They will usually be known as executors (at least in terms of official documentation) the probate will usually be handled by a solicitor. The whole process can be a lot easier when the terms and shares are determined in a will. If successful you’ll be given a ‘grant of probate’
Regardless of how you inherited a deceased estate, you will still be required to prove your relationship, this will be taken care of via a solicitor who will usually have associated solicitor fees.
When you do not need a probate
If you jointly own assets e.g. shares, jointly owned land, property or money etc. these are all automatically passed onto the other shared owner.
You will need to get in touch of banks, mortgage lenders etc. to find out if they require probate to access deceased assets as each organisation may have its own rules and can be more important if you are selling inherited properties.
Selling an inherited house
it can be a stressful thing selling inherited property especially if you are still grieving, there is no wrong or right way to do it and a lot of it down to circumstances. It might be you selling right away or after a bit of time. If you are selling after some time you should check if you’re required to pay inheritance tax via capital gains.
There are a few choices available to you if you’re selling an inherited property. We’ll list as much information as we can to give you enough information to make an informed choice.
Estate agent
Estate agents can be the most common way to sell a property, they’ll be most likely to get you the full market value for the property though it can take some time to complete. They may have better knowledge of an area than you, this can be important if you’re not familiar with the house you are looking to sell. You might find sales drop of or it can get frustrating in how long it takes and of course you’ll have the associated estate agent fees on top.
Auction
This is a very popular method for the type of sales as generally you’ll deal with cash buyers and they’ll be locked in once the bids are complete. You are able to set a price for the property though until the auction is complete you won’t know how much you’ll get for your property. You are not guaranteed a sale and fees can be higher than an estate agent as well as benign required up-front.
Property buying companies
A property buying company is often over-looked or not known but they can be a great alternative to getting a property sold very quickly. You will not get the going market rate for property and usually, it will be 15% less, however, there are no fee’s and with a property sold in just a few days, it is by far the fastest option. The money offered will be the money given, just ensure that the company is a NAPB regulated property buying company as its an unregulated market. We can certainly help with selling your house fast.
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If you are selling inherited property don’t forget to check the following:
Pay inheritance tax: we’ve mentioned it in our guide above but check what tax might be owed, the estate might have accrued e.g. maintenance costs, local council bills which can be potentially be offset, use the government’s calculator to help you find out what you may owe. it’s also worth checking your private residence relief!
Pay Capital gains tax: If you’re not selling your property right away you may have to pay capital gains tax, failure to do so might mean you get charged interest, there are a few exceptions to this.
Income Tax: if you’ve made income from e.g. rent or shared you may need to pay income tax on the money, check with HM revenue to find out more.
You need to pay all of the above or none of the above depending on personal circumstances.
If you need help or advice selling probate properties you can talk to expert property buyers in the UK. We’ve helped hundreds of people dealing with their inherited home and would be happy to give a no-obligation cash offer or free advice today.
Original:
Probate is simply the way in which somebody is given permission to deal with an estate (a property and belongings) of somebody who has died. Very often the person dealing with probate is a relative of the deceased and this can make things quite difficult at an already upsetting time.
A solicitor will help with everything if preferred but bear in mind that fees can be quite high.
As a quick guide these are some of the main things that need to be done;
- An application for probate must be made and this can take some week or even months depending upon just how complex the estate is. However, if there is a property to sell it can be marketed in this time but you won’t be able to complete the transaction until probate is granted.
- Everything must be transparent and documented. You will need to get a number of valuations of the property
- You’ll need to make sure that the property is maintained and secure so consider locks, alarms, heating, the roof condition and anything else that may cause an issue. You’ll need to insure the home and advise the insurer of the circumstances. If it is empty, make sure they are aware.
- Sign up for HM Land Registry Property Alerts. It’s terrible to think, but some fraudsters prey on Probate property and attempt to change the Title or even raise a mortgage on it. Propert Alerts will contact you if anybody tried to amend the Title.
It can be a daunting task, especially at a difficult time but there is plenty of help available and a lot of information online. The following link has all you need to know about selling a probate property – https://www.thegazette.co.uk/wills-and-probate/content/100719.
If you require a free property appraisal or no obligation offer simply contact House Buy Fast for clear, straight forward and friendly assistance. We have dealt with hundreds if not thousands of probate home sales for over a decade.
