Do you pay Stamp Duty on inherited property?

We're here to answer all your inherited property questions, including whether you need to pay Stamp Duty on inherited property…

When it comes to inherited property, there are a lot of questions which can be asked. Do I need to pay Inheritance Tax? How much Inheritance Tax do I need to pay? Can I sell my inherited property? And do I need to pay Stamp Duty on an inherited property?

Aside from all the questions, you also have to come to terms with your emotions. It’s never an easy time for anyone and no one can prepare you for this situation.

Everything is made harder when you don’t have anyone to help and answer your questions for you, which is why we’re here to do the job!

We want to help you with your inherited property questions, to simplify the process as much as we can and give you tips on how you can sell your inherited property, and the best ways to do it.

Do you pay Stamp Duty on inherited property?

No, Stamp Duty is not applicable when you inherit a property, as inheritance is not considered a buying transaction. When a property is passed to you as part of an estate, it is transferred without the need for Stamp Duty payment. Additionally, there is no income Tax or Capital Gains Tax liability at the time of inheritance.

However, Inheritance Tax may apply to the estate from which you’ve inherited the property. This tax is levied on the overall value of the deceased’s estate (including property, savings and other assets) if its value exceeds the £325,000 threshold. The current standard rate of Inheritance Tax is 40% on the amount above this threshold.

Is there Stamp Duty on partially inherited property?

In the UK, Stamp Duty is generally not payable on inherited property, including partial inheritances. If you inherit a property, you don’t pay Stamp Duty when the ownership is transferred to you through inheritance. 

However, Stamp Duty may become relevant if you decide to take further actions involving the property, such as:

Buying out other inheritor’s shares: 

If you inherit part of a property and decide to purchase the remaining shares from other inheritors, Stamp Duty might be payable on the value of the portion you’re buying, depending on whether the value exceeds the Stamp Duty Land Tax thresholds.

Mortgages on inherited property:

If you inherit property with an existing mortgage or take out a mortgage to buy out other inheritors, the mortgage amount may be considered as Chargeable Consideration, which could trigger Stamp Duty Land Tax if the mortgage value exceeds the Stamp Duty thresholds.

What are the Stamp Duty thresholds?

Stamp Duty is a tax payable when purchasing a property over a certain value in England and Northern Ireland, you are required to pay Stamp Duty when you buy a freehold property, buy a new or existing leasehold, purchase a property through a shared ownership scheme or acquire land or property in exchange for payment. 

Here are the current Stamp Duty thresholds in 2024:

• £0 - £250,000: 0% Stamp Duty

• £250,001 - £925,000: 5% on the portion above £250,000.

• £925,001 - £1.5 million: 10% on the portion above £925,000.

• Above £1.5 million: 12% on the portion above £1.5 million.

These rates apply to residential property purchases. For first-time buyers, there is a higher threshold before Stamp Duty applies. First-time buyers can pay 0% on properties valued up to £425,000 and benefit from reduced rates on properties up to £625,000.

Is Stamp Duty payable on transfer of property between family members?

In general, Stamp Duty Land Tax is not payable when a property is transferred between family members if no payment or consideration (such as money or assuming responsibility for a mortgage) is involved. 

Transfer of property with no mortgage

If a property is transferred between family members with no mortgage attached, there is no Stamp Duty to pay, which applies whether the property is inherited or already owned by the family members.

Even if the property is transferred to someone outside the family (e.g. a friend), as long as no money changes hands, and there is no mortgage involved, Stamp Duty will not be payable. 

Transfer of property with a mortgage

But, if the property being transferred has a mortgage attached and the recipient takes on responsibility for the mortgage, this could be considered Chargeable Consideration under Stamp Duty rules. In this case, Stamp Duty may be due based on the outstanding mortgage amount.

Even if the property is transferred as a gift or for no payment, the fact that the new owner is assuming liability for the mortgage can trigger Stamp Duty, which would be calculated based on the amount of the mortgage that the receipt takes over.

Selling property to a family member or friend

If the property is sold rather than gifted to a family member or friend, Stamp Duty is payable as in any other property transaction if the value exceeds the Stamp Duty threshold. In addition, Capital Gains Tax may also be due if the property has increased in value since it was acquired and a profit is made from the sale.

Shared ownership & partial transfers

If only part of a property is transferred to a family member, for example by gifting or selling a percentage of the ownership, Stamp Duty may be payable on the portion of the property being transferred if there is chargeable consideration (such as a mortgage).

For partial transfers, Stamp Duty is calculated based on the proportion of the property being transferred that involves payment or mortgage liability.

How to avoid Stamp Duty on inherited property

Stamp Duty on inherited property is one of the easiest taxes to avoid (or reduce), simply because in most cases it isn’t applicable. However, there are certain cases where Stamp Duty could become an issue, such as if you assume a mortgage on the property or buy out other beneficiaries. 

Stamp Duty Land Tax becomes relevant if the property you inherit has a mortgage and you take over responsibility for the outstanding mortgage, with the amount of Stamp Duty being based on the value of the mortgage you are assuming. 

One way to avoid Stamp Duty in this scenario is to pay off the mortgage before transferring the property. If the mortgage is cleared, the transfer is not considered a purchase and therefore no Stamp Duty is payable. 

If you inherit a share of a property and wish to buy out other beneficiaries’ shares, Stamp Duty may be due on the portion you are buying, depending on the value. To avoid or reduce the Stamp Duty liability, you may want to consider:

• Splitting the purchase over time: You could buy out the shares gradually, keeping each transaction below the Stamp Duty threshold.

• Negotiating a mortgage free transfer: If other beneficiaries agree, the property could be transferred without you assuming the mortgage, thereby avoiding Stamp Duty. 

These strategies can help minimise or eliminate Stamp Duty liability when dealing with inherited property, but it’s always best to seek professional advice tailored to your specific situation.

How do you sell inherited property?

Legally, before you can sell inherited property, you need to establish a relationship with it. In order to do this, you will need to apply for probate.

Probate includes distributing assets as set out in the deceased’s will. The main point of probate is to give a person, or multiple people, the legal authority to deal with a deceased person’s estate.

However, there are exceptions, where you may not need to undergo the probate process.

These exceptions are:

• If the person who died has jointly owned/shared land, or property where it automatically passes to surviving owners. For example, if the deceased was part of a joint tenancy agreement

• If the person who died only has savings and/or premium bonds

The probate process can be a confusing and long process, with it potentially lasting up to 9 months! We suggest enlisting the help of a solicitor – having experience on your side will help make the process less stressful for you and as quick as possible.

Once the probate process has taken place and you are officially the owner of the inherited property, you will now be able to sell it.

Remember, as we said earlier, you won’t need to pay Stamp Duty on inherited property when you inherit it or sell it!

When you take ownership of an inherited property, it’s important to remember you are responsible for the maintenance and utility bills. This is something you need to take into consideration when deciding how to sell the property.

Having to take care of the inherited property and its bills can rack up a significant amount of money, making a quick house sale an attractive option.

With the inherited property comes emotional attachment, which often leads to people wanting to sell it fast to try to help come to terms with their emotions and move on with their next chapter.

When it comes to a fast house sale, you have a couple of options. Although selling through the open market with an estate agent may be the first idea which comes to mind, this most likely won’t help you sell your house fast.

According to The Advisory, the average time it takes to sell a house in the UK is 18 weeks. This means you’ll likely be ‘stuck’ with your inherited property for over 4 months before it sells, racking up multiple bills and also acting as a reminder of someone you have lost.

As an alternative to selling through the open market with an estate agent, you could look to sell your inherited property through auction or with a ‘cash house buying’ company, who specialise in getting you a quick house sale.

At auction, you will only get buyers with their finances already in place. After the hammer comes down, contracts are exchanged and the buyer will have between 20 to 28 days to complete, meaning you will know you’ll be selling your inherited property fast. However, the buyer is still able to pull out and forfeit their 10% deposit. Even at auction you can’t guarantee a buyer!

With a fast house sale company, all you have to do is tell them about your inherited property and they will give you a CASH offer, with some being able to complete in as little as 7 days! These companies are also a guaranteed buyer, so there’s no worry of them pulling out.

At both auction and quick house sale companies, you will only get serious buyers – yes, no time wasters! You also won’t get gazundered with either option, as when the price is agreed it’s guaranteed!

At auction, you’re likely to end up with the hammer coming down on a lower price for your property, compared to what you could get on the open market. You will also have to pay a commission of this sold price to the auctioneer, whilst also paying for advertising costs, room hire and all your own legal fees.

At cash house buying companies, you can be offered up to 80% of the current market value, with no worry of them pulling out of the deal. Unlike at auction, you won’t have to pay a single penny! Yes, they really will cover those legal fees for you!

At auction, you will also need to host multiple open days for interested parties to view the inherited property, meaning you will need to constantly ensure the property is in good shape. BUT, at a quick house sale company they only require one quick viewing, just to ensure the price agreed is reflective of the property.

Some quick house sale companies will also help with the probate process and arranging removals from the inherited property, to try minimising the upset to you.

If a cash house buying company is something you’re after to get you a fast sale, then we’re here to help!

Here at The Property Buying Company we will buy your inherited property for cash, in as little as 7 days! We have over 50 years combined experience, meaning we know how difficult it is when trying to sell and part ways with a property you’ve inherited.

We will help you go through the probate process, arrange removals and also cover all your legal fees – anything we can do to help make this process a little bit easier!

Give us a call or fill in our online form today to receive a no-obligation cash offer for your inherited property, to help you sell it fast and move on with your next chapter.