Inheriting a property in the UK can be one of the most significant financial events in a person’s life — and one of the most practically complicated. It arrives at a time of grief, often with no instruction manual and a ticking clock for certain tax obligations. Understanding what happens to a property when someone dies, what taxes may be due, and what options you have as a beneficiary is not just useful — it is necessary.
When someone dies leaving a property, a legal process must take place before anyone can sell it, transfer it, or take ownership. That process is probate. How quickly it resolves, and what tax falls due, depends on the estate’s total value, who the property passes to, how it was owned, and whether there is a valid will.
This guide explains the process from death to transfer, the key taxes involved, and the main options available to those who inherit — with current figures and legislation for 2025/26.
How Property Ownership Passes on Death
The way a property was legally owned determines what happens immediately after the owner dies.
Joint tenants
If the deceased owned the property jointly with another person as joint tenants — the most common arrangement for married couples and civil partners — the property automatically passes to the surviving owner by the right of survivorship. This happens regardless of what the will says and does not require probate for that specific asset. The surviving owner simply needs to update the Land Registry title by providing the death certificate.
Tenants in common
If the property was owned as tenants in common, each owner holds a defined share — commonly 50/50, but not always. The deceased’s share does not automatically pass to the co-owner. It forms part of the estate and passes according to the will or, if there is no will, according to the rules of intestacy. Probate is typically required before the share can be transferred or sold.
Sole ownership
If the deceased owned the property in their name alone, the property forms part of the estate and probate must generally be obtained before it can be dealt with.
No will — intestacy rules
Where someone dies without a valid will, they are said to have died intestate. Their estate is divided according to the intestacy rules set out in the Administration of Estates Act 1925. Under these rules, the surviving spouse or civil partner inherits the first £322,000 of the estate plus personal possessions and half of any remaining estate; children receive the other half. If there is no spouse or civil partner, the estate passes to children; if no children, to parents; if no parents, to siblings; and so on. If no qualifying relatives can be found, the estate passes to the Crown. These rules do not reflect what many people would choose — which is the principal reason for making a will.
Read also- What Are Estate Agent Fees and Are They Negotiable?
Probate: The Legal Gateway
For most property that does not pass automatically, the executor named in the will (or an administrator appointed by the court if there is no will) must obtain a Grant of Probate or Letters of Administration before the property can be sold or transferred.
Probate is the legal process by which the courts verify who has authority to manage the estate. It does not transfer ownership itself — it confirms that the person acting on the estate has the legal right to do so.
What probate involves:
- Valuing all assets in the estate — property, savings, investments, and personal possessions — at the date of death
- Calculating any outstanding debts, including mortgages, loans, and funeral expenses
- Determining whether inheritance tax is payable and, if so, paying it before the grant is issued
- Applying to the Probate Registry for the grant
How long does it take?
Probate typically takes between two and six months to obtain once an application is submitted, though complex estates, disputes between beneficiaries, or backlogs at the Probate Registry can extend this considerably. You can market a property for sale before probate is granted — you can even accept an offer — but you cannot complete a sale until the grant is in hand.
What if there is a mortgage on the property?
If the deceased had a mortgage, the lender must be notified promptly — most lenders have dedicated bereavement teams and will suspend payments temporarily while the estate is being administered. The mortgage does not disappear on death; it must be serviced from the estate or ultimately repaid through the sale of the property. If the property was held as joint tenants and the co-owner inherits, they take on responsibility for the mortgage directly.
Inheritance Tax: The Key Figures for 2025/26
Inheritance tax (IHT) is levied on the estate of the deceased, not on the beneficiary directly. It is payable before the estate can be distributed and, critically, before the grant of probate is usually issued. For estates with a large illiquid property, this can create a cash flow challenge — the property cannot be sold to pay the tax until probate is granted, yet probate requires the tax to be paid first. Loans against the estate or instalment arrangements with HMRC are available in some circumstances.
The key thresholds for 2025/26:
| Allowance | Amount |
|---|---|
| Nil-rate band (everyone) | £325,000 |
| Residence nil-rate band (property to direct descendants) | £175,000 |
| Combined individual maximum | £500,000 |
| Combined maximum for married couple/civil partners | £1,000,000 |
| IHT rate above threshold | 40% |
| Reduced rate (10%+ of estate left to charity) | 36% |
The nil-rate band has been frozen at £325,000 since 2009 and is not expected to change until at least April 2031. With property values having risen substantially over that period, more estates are being drawn into IHT liability as a result.
The residence nil-rate band (RNRB) adds £175,000 on top of the standard nil-rate band where the main residence passes to direct descendants — children, grandchildren, stepchildren. It does not apply to nieces, nephews, friends, or other beneficiaries. For estates worth more than £2 million, the RNRB tapers away — reducing by £1 for every £2 above that threshold, disappearing entirely at £2.35 million.
Transfers between spouses and civil partners are entirely exempt from IHT. When the first spouse dies, any unused nil-rate band and residence nil-rate band transfers to the survivor, potentially allowing a combined estate of up to £1 million to pass tax-free on the second death.
Inheritance tax is payable within six months of the end of the month in which the death occurred. Interest accrues on unpaid amounts after that point.
One important upcoming change: from April 2027, most inherited pension funds will become liable for inheritance tax for the first time. This does not affect 2025/26 estates but will affect estate planning decisions made now.
Capital Gains Tax When You Sell an Inherited Property
Inheriting a property does not itself trigger capital gains tax (CGT). CGT becomes relevant only if you later sell the property — and only if it has increased in value since you inherited it.
How the gain is calculated:
Your base cost for CGT purposes is the probate value — the market value of the property at the date of the deceased’s death, as established for IHT purposes. If you sell for more than the probate value, the difference (minus allowable costs such as solicitors’ fees, estate agent fees, and the cost of any capital improvements) is your taxable gain.
CGT rates on residential property (2025/26):
| Taxpayer band | CGT rate on residential property |
|---|---|
| Basic rate (income up to £50,270) | 18% |
| Higher/additional rate (income above £50,270) | 24% |
| Annual CGT allowance (per person) | £3,000 |
If you move into the inherited property and it becomes your main residence, Private Residence Relief may reduce or eliminate the CGT liability when you come to sell. However, the relief only applies for the period it was your principal home — any time the property was empty or let before you moved in does not qualify.
The 60-day reporting rule: if you sell an inherited residential property and CGT is payable, you must report the disposal and pay the estimated tax to HMRC within 60 days of completion, using HMRC’s online property reporting service. Failure to do so triggers penalties and interest. This is a strict deadline that many people are unaware of.
Your Options When You Inherit a Property
Once probate is granted, there is no obligation to sell. The options available to beneficiaries are:
Move in
If the property is in a reasonable condition and in a location that works for you, moving in is straightforward from a legal perspective. You take on responsibility for any outstanding mortgage, buildings insurance, council tax, and maintenance. If the property then becomes your main residence, you benefit from Private Residence Relief on any eventual sale.
Keep it and let it out
Retaining the property as a rental asset generates income but introduces obligations: landlord duties, mortgage lender consent (or a buy-to-let remortgage), compliance with safety regulations, and income tax on rental profits. If there are multiple beneficiaries who disagree about the right course of action, this can create complications. You should also bear in mind that letting the property before selling will affect the calculation of any Private Residence Relief on a future sale.
Sell it
Selling is the cleanest resolution, particularly where there are multiple beneficiaries, outstanding IHT liabilities to fund, or the property requires significant renovation. The sale process is standard conveyancing once probate is in place. Remember the 60-day CGT reporting deadline if the property has increased in value since the probate valuation.
Transfer it to a beneficiary
If the will directs that the property passes to a named beneficiary — or if all beneficiaries agree on a redistribution — the property can be transferred by way of assent rather than sold. Stamp Duty Land Tax is generally not payable on a transfer following death, though professional advice should be taken on the specific transaction.
For official guidance on probate and dealing with an estate, check: GOV.UK — wills, probate and inheritance
A Note on the London Market
In London, where average house prices were approximately £554,000 in January 2026 (ONS data), inherited properties frequently exceed the individual IHT nil-rate band of £325,000 — even before accounting for other assets in the estate. The residence nil-rate band helps in many cases, but the combination of London property values and the frozen nil-rate band means London families are disproportionately affected by inheritance tax compared to the national average.
This is worth factoring in not just for those inheriting now, but for those planning their own estate — professional advice on will structures, trust arrangements, and the use of available reliefs can make a material difference to what ultimately passes to the next generation.
For current inheritance tax thresholds and rules, check: GOV.UK — inheritance tax
Conclusion
Inheriting a property sets in motion a legal and financial process that most people encounter only once or twice in their lives, at a time when practical matters are the last thing they want to think about. Understanding probate, the inheritance tax thresholds, capital gains tax on sale, and the options available to beneficiaries removes at least some of the uncertainty.
The six-month IHT payment deadline and the 60-day CGT reporting window are the two practical deadlines most likely to cause problems if missed. Both are worth marking from the day of death.
For complex estates, professional legal and tax advice from a solicitor and an accountant who specialise in this area is not optional — it is the most straightforward way to ensure the process is handled correctly and the estate passes to those it was intended for.
Frequently Asked Questions
Do I pay inheritance tax when I inherit a property?
Inheritance tax is paid by the estate before it is distributed, not by the beneficiary directly. If the estate's total value exceeds the available nil-rate band allowances, the executor pays IHT to HMRC — typically from estate funds — before the Grant of Probate is issued.
Do I need probate to sell an inherited property?
In most cases, yes. You need a Grant of Probate (or Letters of Administration if there is no will) before you can legally complete the sale of a property that belonged to a deceased person, though you can market the property and accept an offer before probate is granted.
What happens to the mortgage on an inherited property?
The mortgage must continue to be serviced from the estate during probate. If you inherit the property, you take on responsibility for the mortgage — either by continuing the existing arrangement with the lender's agreement or by taking out a new mortgage in your own name. If the estate cannot meet the mortgage payments, the lender has the right to sell the property to recover the debt.
