Tax on property you inherit

Posted on 12th December 2022 by Streets - Inheritance Tax

If you inherit property, you are usually not liable to pay tax on the inheritance. This is because any Inheritance Tax (IHT) due should be paid out of the deceased’s estate before any cash or assets are distributed.

The rate of IHT currently payable is 40% on death and 20% on lifetime gifts. IHT is payable at a reduced rate on some assets if 10% or more of the 'net value' of the estate is left to charities.

If you inherit a property, you are not immediately liable for Stamp Duty, Income Tax or Capital Gains Tax. HMRC would contact you if any IHT was payable.

If you receive an inheritance, you will be liable to Income Tax on any profit earned after the inheritance, for example, Capital Gains Tax (CGT) on the increase in property value after the date of inheritance or tax on rental income. If inheriting a property means you own two properties, you must tell HMRC which property is your main home within two years. There are special rules if the property is held in trust.

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