How To Handle Inheritance Tax Implications When Selling A Property?

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Dealing with the estate of a deceased loved one is difficult on many levels. On top of grief, inheriting a property can lead to complex tax implications in the UK that must be handled properly when selling or transferring ownership. For property sales, taxes are due even if proceeds will be reinvested rather than distributed to beneficiaries. Therefore inheritance tax planning is crucial to avoid financial pitfalls for beneficiaries or executors when selling an inherited home. This guide covers key steps UK inheritors should take to manage inheritance tax liability and ensure smooth property transfers.

Value the Property and Overall Estate

The first step upon inheriting a property is having it valued appropriately by a qualified surveyor along with the total estate. This gives you the full picture of inheritance tax liability based on current market prices. Property value can be surprising based on location, land, renovations etc. Use a registered RICS surveyor for an accurate, impartial valuation that HMRC will accept. Additionally, assess any mortgages, loans, debts, or liens secured against the property that may reduce the net equity value subject to tax. Also factor in values of any other major assets like investments, art, insurance etc when calculating total estate value. This helps determine the potential inheritance tax owed overall.

Review Option to Transfer at Probate Value

In some cases for inherited properties, beneficiaries can choose to transfer ownership at the lower probate value rather than the current market value. This means calculating and paying inheritance tax based on the property’s valuation at the time of the owner’s death rather than the often higher value at the time of sale or transfer. This route may make sense if property values have increased significantly since initial inheritance. Consult professionals to see if transferring at probate value is possible and prudent for your situation.

Consider Instalment Option For Tax Payments

While inheritance tax is due upon property transfer, beneficiaries can request to pay in instalments over 10 years if the tax owed exceeds your liquid assets availability. Discuss with HMRC to set up an approved instalment plan if needed to gradually pay the tax owed while retaining the property long term.

Discuss Liability for Tax Payments

Clarify upfront if inheritance tax payments will come from the estate or if beneficiaries will be liable. Typically the executor funds tax payments during probate before disbursing net assets to inheritors. However, for property sales taking place later, beneficiaries may be deemed responsible for covering the tax. Define these responsibilities early to avoid confusion over debts to HMRC following a property sale.

Plan to Pay Tax When Selling

If you must pay inheritance tax when selling the inherited property, plan to reserve sufficient sale proceeds. Discuss with your solicitor to estimate the tax bill projected from the sale price. Banks typically allow funds disbursement 2-4 weeks after sales completion. Don’t commit sale proceeds until HMRC confirms the inheritance tax amount and your payment clears. You may need to take out a short-term loan as a cash flow stopgap to settle tax before receiving your sale balance. With planning, funds can be secured in time to prevent transfer delays.

Seek Expert Help

Executors and beneficiaries should seek expert help from an experienced solicitor, accountant, or tax adviser when navigating inheritance tax issues. The intricacies around valuations, exemptions, allowances, reliefs and payment timelines are complex, but professionals can guide you through the process accurately. Their fees are well worth avoiding HMRC disputes or unforeseen tax bills down the road post-sale. They can also advise if any tax planning arrangements the deceased had in place influence liability.


Selling an inherited UK property prompts many important taxes on house sales that executors and beneficiaries must address properly for smooth transactions. Seek professional valuations of the property and wider estate. Understand allowances available to reduce inheritance tax liability. Discuss responsibilities for tax payments and prepare funds in time. With expert guidance, inheritance tax affairs can be managed appropriately to avoid any disruptions when executing property sales or transfers on behalf of an estate.

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