Costs of selling an inherited property

Inheriting a home can be both a blessing and a challenge. It can represent emotional and sentimental value or a valuable financial asset. The process of selling an inherited property comes with its own set of complexities. Whether you’ve inherited a house, land, or flat, understanding the financial implications is important. 

If you wish to sell inherited property, you need to consider more than just estate agent fees and conveyancing charges. You might also have to deal with potential tax obligations, such as inheritance tax and capital gains tax. There may be a need for repairs, maintenance, and upgrades to make the property market-ready. 

Not to mention that the legal process, like probate, may need to be completed before you can proceed with the sale. This can incur costs as well. To understand the actual cost of inheriting a house, you need to consider many factors. In this guide, we aim to provide you with a general overview of typical expenses associated with selling an inherited property in the UK. This will offer insight into how you should navigate this process efficiently.

That said, we can also assist you. We are cash home buyers and will provide you with an offer regardless of the state of your property. So, once your home is ready to be sold, make sure to contact us for a seamless experience.

What do you need to pay for when selling an inherited house?

Selling inherited property in 2024 will require careful financial planning, as a range of costs can arise before and during the sale process. Below, we’ve outlined some of the key expenses you might encounter when trying to sell inherited property.

Property Insurance

You must ensure that the inherited property is insured as soon as possible. Standard home insurance policies held by the deceased may lapse shortly after their passing, leaving your property vulnerable. Depending on how you intend to use the property, you might need one of the following:

Mortgage Payments

Have you inherited a property with a mortgage? In that case, you are responsible for mortgage payments, even if you do not live there. You are essentially inheriting the property along with any mortgage debt. Therefore, if you have inherited a home with a mortgage, it is important to contact the mortgage lender.

Explain the situation, and they will assist you with the rest. Many mortgage lenders will have a “grace period,” meaning that you won’t have to pay the mortgage until after the probate is complete and the property has been transferred to you.

The financial impact will depend on the type of mortgage and its terms:

Property Maintenance and Bills

You need to maintain the property in good condition if you want to attract buyers. Maintenance costs can include various repairs, cleaning, garden upkeep, and other tasks. If the property remains empty, you will need regular inspections to ensure that everything is safe and damage-free.

Travel Costs

Where is the inherited property located? If it is situated far from where you live, you will need to consider travel costs as well. Visiting once or twice might not be overly expensive, but the travel costs can easily accumulate. Frequent visits will be necessary for various reasons, including meeting estate agents or surveyors, overseeing maintenance, property inspections, attending viewings, etc.

Travel expenses can include anything from fuel costs for driving to public transport fees. If the inherited property is far away, you might also need overnight accommodation or meals during extended visits. These costs can become quite burdensome, especially if the property takes a long time to sell or be repaired.

Tax Obligations

When selling an inherited property, you will have to deal with tax liabilities that can significantly impact your finances.

Of course, the fastest and easiest way to sell your home is definitely through The Property Buying Company. We will buy your home for cash, and we can do it in as little as 7 days. Not to mention that you do not have to worry about additional expenses; we handle everything.

What is the base cost of an inherited property?

The base cost of an inherited property in the UK is usually its market value at the time of inheritance. This valuation is important for calculating potential tax liabilities, such as CGT, if you wish to sell your property later on.

How much tax do you pay on selling property inherited?

There are specific tax obligations to consider, which include Inheritance Tax, Capital Gains Tax, and potentially Income Tax.

Inheritance Tax  

Threshold - £325,000 per person, or £500,000 if the property is passed to direct descendants.  

Rate - 40% on the value above the threshold.  

Example - If the property is valued at £600,000, that means it is above the threshold. IHT due is £100,000, resulting in £40,000 in tax.  

The estate usually pays this during the probate period, so you won’t have to pay it when selling the property.

Capital Gains Tax  

CGT will apply to any increase in the inherited property’s value between inheritance and sale.  

Base cost - This is the market value at the date of inheritance.  

Annual Allowance - £3,000  

Rates:  

• 18% for basic-rate taxpayers (income up to £50,270)  

• 28% for higher-rate taxpayers (income above £50,270)

Income Tax  

This only applies if the house was rented before the sale. The rental income is then taxed at the usual income tax rate:  

• 20% for basic rate.  

• 40% for higher rate.  

• 45% for additional rate.

Do I pay stamp duty on inherited property?

You do not pay Stamp Duty Land Tax when you inherit a property, regardless of its value. However, you may have to deal with SDLT in other circumstances. Here is what you need to know:

Stamp duty does not apply when you inherit a property.  Additionally, if you receive a property as part of an estate, you do not have to deal with SDLT.

If you have co-inherited property and you buy the other share, SDLT is payable on the value of the share you purchased. This only applies if it exceeds the SDLT threshold of £250,000 for residential properties or £425,000 for first-time buyers. Additionally, if you take a mortgage or debt as part of the transfer, you may have to deal with SDLT on the value of the debt if it exceeds the threshold.  

Keep in mind that if you sell property after inheritance, SDLT will not be your responsibility; this is the responsibility of the buyer. If you do not understand how this works, you should seek advice from a professional.

How much is capital gains tax on inherited property?

The amount of tax you need to pay when selling an inherited home in the UK will mainly depend on the CGT. This tax is applied to any increase in the property’s value from the time of inheritance to the time of sale.

Capital Gains Tax Rates  

Basic Rate Taxpayers - You need to pay 18% on gains that are within your basic income tax band.  

Higher Taxpayers - You must pay 28% on any gain exceeding the basic rate threshold.

How to calculate CGT?  

First, determine the sale price of the property. Then, subtract the property’s base cost, which is the market value at the time of inheritance. You can deduct allowable expenses, such as estate agents, legal costs, and the cost of any other improvements. However, as mentioned, maintenance costs cannot be deducted. The result will be your taxable gain.

Other Considerations  

• The annual CGT allowance can be subtracted from your taxable gain to reduce liability.  

• If the property was your main residence during the time you owned it, you may qualify for Private Residence Relief. This can reduce or eliminate CGT.  

• If you have rented out the property, you might need to consider rental income separately under income tax.

• Make sure to seek advice from a tax professional. With proper planning, you will be able to minimise your tax bill.

How much does probate house valuation cost?

The cost of probate house valuation will vary depending on how the valuation is conducted. If you use an estate agent, you will probably receive the valuation for free, especially if they are interested in handling the sale of your property. However, these valuations might not meet HMRC’s requirements, particularly if the property’s value is disputed.  

If you want a more accurate and reliable assessment, you need a professional valuation conducted by a surveyor. This type of valuation typically ranges from £250 to £1,000. It really depends on the property’s size, complexity, and location.  

You could also use online valuation tools if you wish. They often charge between £20 and £50, but they are not as precise as hiring a professional to assist you.  

As for those solely interested in selling their property, we can certainly help with that. To get started, simply enter your postcode at the top of the site, answer a couple of questions, and we’ll give you a call.