Do I need to pay tax on inherited property?
You won’t usually have to pay any Stamp Duty or tax upon inheriting property, unless you’ve received more than £325,000 worth of non-exempted gifts from the deceased in the seven years prior to their death. So, if you were gifted property by the deceased before they died, you may be responsible for paying an inheritance tax charged on a “tapering relief” scale:
Years between gift and death |
Tax due
|
0 - 3
|
40%
|
3 - 4
|
32%
|
4 - 5
|
24%
|
5 - 6
|
16%
|
6 - 7
|
8%
|
7 +
|
0%
|
While inheritance tax is usually paid by the deceased’s estate, the inheritance tax on gifts is paid by the beneficiary. After seven years, gifts are no longer considered in the value of the deceased’s estate.
Other possible exceptions include:
Income tax
If the deceased owed income tax or was due for a refund, you may have to ensure that the correct amount was paid. You may also owe income tax on profit you earn from share dividends or from inheriting an asset that generates income, such as a rental property.
Capital gains tax
You may need to pay capital gains tax if you sell a property or shares of a property you’ve inherited, especially if the property’s value increases during probate.
Inheritance tax
If the property is valued above £325,000 and left to someone other than a civil partner, charity, or community amateur sports club, the estate may owe inheritance tax.
Properties held in trust
If you are the trustee holding a property in trust or the beneficiary of a “bare trust” you’re responsible for paying tax on the income the trust receives.