Inheriting a UK rental property pushes the executor into decisions that are easy to get wrong and expensive to fix later. The probate value the personal representatives put on the property at the date of death becomes the CGT base cost for everyone downstream: the PRs themselves if they sell, the beneficiary if they sell after an assent, HMRC if they reopen the IHT computation. The rate the PRs pay on a sale during administration is 24 per cent (the trustee and PR residential rate), which is almost always strictly worse than handing the property to a basic-rate beneficiary first. And if any beneficiary lives outside the UK, the Non-Resident Landlord scheme triggers the moment they become the landlord, so the assent date and the NRL1 approval date need to be sequenced deliberately.

This page walks the seven steps an executor takes with a rental property, from death to closing the estate. It is the operational companion to our CGT on inherited rental property calculation guide (the stepped-up base cost in isolation) and the SDLT on probate property transfers page (the five categories of probate transfer and the SDLT on each). The descriptive IHT pillar at inheritance tax on rental property portfolios carries the wider IHT context.

The executor's job, in one paragraph

The personal representatives' task with respect to a rental property is to value it accurately at the date of death, declare it to HMRC, obtain the grant, manage the tenancy through the administration period without giving the tenant grounds for complaint, decide whether to sell the property within the estate or assent it to the beneficiary, execute the chosen route, and, if the beneficiary is non-UK resident, hand over the NRL responsibilities cleanly. Every other moving part (sitting tenant deposit protection, mortgage discharge, the basic-rate income tax on rents collected during administration, the Schedule A1 IHTA 1984 look-through for offshore-held UK residential property) sits underneath one of those seven steps.

Step 1: Lock the date-of-death valuation

The valuation drives both IHT and CGT for years afterwards, so the executor cannot defer it or sketch it. The standard is an open-market valuation at the date of death on a willing-buyer, willing-seller basis. For a single rental property a RICS Red Book valuation by a chartered surveyor is the defensible minimum, and HMRC routinely challenges desk-top estate-agent valuations on estates near the IHT threshold. Our portfolio valuation methodology guide covers the wider approach across a multi-property estate.

Three rental-specific adjustments are commonly applied at the valuation:

  • Tenanted occupation discount. A property occupied under an assured shorthold tenancy with a sitting tenant is worth less than the same property with vacant possession. The discount is fact-sensitive but routinely 10 to 15 per cent. For a regulated tenancy under the Rent Act 1977 (rare now, but possible for inherited stock acquired pre-1989) the discount can be substantially larger because the landlord cannot easily obtain vacant possession.
  • Outstanding dilapidations and capital works. The estimated cost of work that a buyer would price into their offer reduces the open-market value. Disclosing these on Schedule IHT405 keeps the valuation defensible.
  • Co-ownership discount. Where the deceased held the property as tenants in common, the estate is valuing a share, not the whole. The standard share discount is 10 to 15 per cent of the proportionate freehold value, reflecting the practical difficulty a hypothetical buyer would have in selling that share separately.

Record the valuer's name, qualifications, the inspection date, and the assumptions made. The valuation report should be retained with the estate papers indefinitely, because the same number will be used as the CGT base cost for any beneficiary disposal that follows years later. Under-valuing the property to suppress IHT is one of HMRC's standard enquiry triggers, and the downstream cost (CGT on a higher gain at disposal) typically exceeds any IHT saving even before penalties.

Step 2: Excepted estate, or full IHT400?

For deaths on or after 1 January 2022, the IHT (Delivery of Accounts) (Excepted Estates) (Amendment) Regulations 2021 (SI 2021/1167) abolished form IHT205. Excepted estates are reported directly through the probate application (PA1P with a will, PA1A without). Non-excepted estates file a full IHT400 with supporting schedules. The three excepted-estate categories are narrow:

  • Low-value excepted estate. Gross value at most £325,000 (the nil-rate band) and almost no specified transfers in the seven years before death. A single modest rental property added to a main residence will usually push the estate above £325,000 on its own.
  • Exempt excepted estate. Gross value at most £3,000,000 and net chargeable value (after the spouse, civil partner and charity exemptions) at most £250,000. Useful where most of the estate passes to a surviving spouse; the IHT bill is nil and the IHT400 is not required.
  • Foreign-domicile excepted estate. Narrowly applicable to individuals who were never UK domiciled and held limited UK assets. After the April 2025 residence-based IHT regime the framing is being recast around the long-term resident concept, but the gateway threshold remains modest.

Most landlord estates with rental property file IHT400. The form is due within 12 months of the end of the month of death; interest accrues from six months. The rental property is reported on Schedule IHT405 (jointly-owned land separately on Schedule IHT404 if applicable). Where the estate is enveloped through an offshore company, Schedule A1 IHTA 1984 looks through the company to the underlying UK residential property and the property is reported as part of the deceased's estate notwithstanding the company wrapper. The non-resident IHT page covers Schedule A1 in more depth for executors administering an offshore-structured estate.

Step 3: Apply for the grant

The personal representatives apply for the grant through HM Courts and Tribunals Service. With a will, the executors apply on form PA1P. Without a will, the closest qualifying relative applies for letters of administration on form PA1A. The application fee is £300 for estates with a net value above £5,000 and nil below.

Where IHT is payable, HMRC and HMCTS sequence as follows: the executors submit IHT400 to HMRC; HMRC issues a unique reference and an IHT421 receipt confirming any IHT due has been provided for; the executors send IHT421 with the probate application; HMCTS will not issue the grant until IHT421 is received. The chain typically adds four to eight weeks to the timeline for an IHT-paying estate over and above the equivalent excepted-estate timeline. HMRC's instalment option under section 227 IHTA 1984 lets the executors pay the IHT on land in ten annual instalments, which is useful where the estate's liquidity is locked up in the rental property and a sale is not immediate; the first instalment is due before the grant.

The grant arrives as a sealed document. From that point the personal representatives can deal with the property in their own right: collect rent, give notices, instruct agents, and (in due course) sell or assent.

Step 4: Running the property during the administration period

The administration period is the window between death and the closing of the estate (or, for any specific asset, the date of the assent or sale). For a rental property this period has its own tax treatment.

Rental income on the estate

Rental income accrued from the date of death until the assent or PR sale belongs to the estate. The PRs are taxed at the basic rate only (20 per cent on property income; trustees and PRs do not access the higher rates on property income, do not get a personal allowance, and cannot use the property allowance). Mortgage interest paid during administration is deductible in full because section 24 ITTOIA 2005 finance-cost restriction applies to individual landlords, not to estates. Where administration-period income from the property exceeds £500 in a tax year, the PRs file a Trust and Estate Self Assessment return (SA900) for that year and pay the tax. Income paid out to beneficiaries during administration carries an R185 (Estate Income) tax-credit voucher.

Tenant continuity and the change-of-landlord notice

The death of the landlord does not end the tenancy. The tenancy vests in the personal representatives by operation of law on death and passes to the beneficiary on assent. Sections 3 and 3A of the Landlord and Tenant Act 1985 require the new landlord to give the tenant written notification of the change of landlord and the new landlord's name and address within two months of the change. Failure is a continuing summary criminal offence under section 7 of the 1985 Act, and (more practically) prevents the new landlord from suing for rent until the notice is given. The notification is administrative but easy to miss in the months after a death.

Deposit re-registration

Where the tenant paid a deposit under an assured shorthold tenancy after 6 April 2007, the deposit must be protected in one of three statutory schemes (DPS, MyDeposits, TDS) within 30 days. On a change of landlord, the new landlord must re-register the deposit and serve fresh prescribed information within 30 days of the change (Housing Act 2004 ss.213-215). The PRs re-register on death and the beneficiary re-registers again on assent. Missing the 30-day deadline exposes the new landlord to a court order of one to three times the deposit value and disables the section 21 no-fault eviction route (where still available; the Renters' Rights Act 2026 is in passage and re-shapes the section 21 framework, but the deposit-protection penalty survives the reform).

The PRs' CGT position if a sale arises during administration

Where the PRs sell during administration, the gain is computed against the death-uplift base cost under TCGA 1992 s.62. The rate is 24 per cent under section 1H TCGA 1992 (the trustee and PR residential property rate, aligned with the higher individual rate from 6 April 2024 and unchanged at the Autumn Budget 2024). PRs get the annual exempt amount of £3,000 for the tax year of death and the two following tax years under section 3(7) TCGA 1992; from the fourth tax year of administration the AEA is zero. The PRs cannot use private residence relief (the property was not their own residence) and cannot use letting relief. Capital losses arising on PR sales can be set against PR gains in the same or later years of administration but generally cannot be transferred to beneficiaries.

Step 5: Sell through the estate, or assent to the beneficiary?

This is the executor's most consequential financial decision after the valuation itself. The structural choice is between two routes:

  • PR sale. The personal representatives sell the property during administration. CGT at 24 per cent on the gain after the PRs' £3,000 annual exempt amount (years 1 to 3 of administration). The estate receives cash. The cash is then distributed to beneficiaries (no further CGT or SDLT on the cash distribution itself).
  • Assent then beneficiary sale. The PRs assent the property to the beneficiary. CGT runs at the beneficiary's rate (18 per cent if a basic-rate taxpayer, 24 per cent if higher-rate) on any gain between the death-uplift base cost and the beneficiary's eventual sale. The beneficiary uses their own annual exempt amount and any unused capital losses.

The decision lever is the beneficiary's marginal income tax position. For a basic-rate beneficiary the saving is 6 percentage points on every pound of gain: a £40,000 gain pays £6,660 in CGT on the assent route (basic rate after £3,000 AEA) versus £8,880 on the PR-sale route (24 per cent after the PRs' £3,000 AEA). Add the beneficiary's unused capital losses or private residence relief on a subsequent change of use and the gap widens further. For a higher-rate beneficiary the rates align (both 24 per cent) and the deciding factors become liquidity, sale timing, the number of beneficiaries, and whether the beneficiary plans to keep the property as a rental or move in.

Three patterns favour the PR-sale route despite the rate disadvantage:

  1. Multiple beneficiaries who all want cash. Selling once and distributing cash is administratively cleaner than assenting into a joint tenancy and orchestrating a beneficiary-side sale where one beneficiary later refuses to cooperate. The 6 percentage points cost is the price of avoiding a future intra-family dispute.
  2. Immediate sale anyway. Where the beneficiary intends to sell straight away, the PR-sale route compresses the timeline (no assent registration, no deposit re-registration, no fresh NRL workflow). The CGT cost is similar at the higher rate but the administrative cost is lower.
  3. Beneficiary cannot access PRR. The PR sale uses the PR AEA. A beneficiary who plans to leave the property tenanted is in the same CGT position as the PRs but without the PR-period AEA available to the estate. The PR route preserves the £3,000 AEA across more tax years if the property would otherwise sit on the beneficiary's CGT account for years.

An additional and orthogonal route: a deed of variation under section 142 IHTA 1984 within two years of death can redirect the property to a different beneficiary entirely (a sibling, a child, or a discretionary trust). The IHT and CGT positions are read back to the date of death; SDLT does not apply (paragraph 8 of Schedule 4 FA 2003). Variations are a useful tool for steering the property to whichever person's CGT, income, or estate position works best. The gifting property to family members guide covers the lifetime-gift equivalent for the comparison.

Step 6: Executing the assent (form AS1)

If the PRs decide to assent, the mechanics are administrative rather than tax-driven. The assent is recorded on Land Registry form AS1 (whole) or AS3 (part). The PRs sign as transferors; the beneficiary takes by entitlement, not as buyer. There is no SDLT and no SDLT return, because there is no chargeable consideration. The five-category SDLT analysis is set out at length in the SDLT on probate property transfers page; the headline for an executor is that a true assent (no consideration, no assumed mortgage, no buy-out by one beneficiary of another) is outside SDLT entirely.

Where the property is mortgaged and the beneficiary assumes the mortgage as part of the inheritance, the assumed debt is chargeable consideration. SDLT applies on the assumed mortgage balance and the 5 per cent additional dwellings surcharge bites if the beneficiary already owns another residential property. The clean way to defuse this is for the PRs to redeem the mortgage from estate funds before the assent, so the property arrives unencumbered; the SDLT charge then disappears entirely. Where estate liquidity does not allow that, the alternative is for the beneficiary to refinance on completion of the assent at a price low enough to fall below the SDLT threshold or to claim a relief.

Once AS1 is registered, the property is the beneficiary's. The CGT base cost for the beneficiary is the date-of-death valuation. Rental income from the assent date onwards is the beneficiary's, taxed under their own self-assessment.

Step 7: Handing over the NRL responsibilities when the beneficiary is non-resident

If the beneficiary is non-UK resident at the assent date, the Non-Resident Landlord scheme engages from the first rent that the beneficiary becomes entitled to. NRL is statutory under the Taxation of Income from Land (Non-residents) Regulations 1995 (SI 1995/2902); it operates regardless of whether the beneficiary's country of residence has a double-tax treaty with the UK. The full operational mechanics are covered in our NRL complete guide.

The executor's job is to sequence the handover. The cleanest pattern is for the beneficiary to file NRL1 (NRL2 for a company, NRL3 for a trust) four to six weeks ahead of the assent date so HMRC's approval letter is in place by the time the property changes hands; the agent then pays gross from the first month and the beneficiary settles via self-assessment. If NRL1 is filed at the assent date instead, the agent withholds basic-rate tax on net rents quarterly on NRL2 returns during the four-to-six-week approval gap; the over-deduction is reclaimed at year-end. Where rent is paid directly by the tenant (no agent in the chain) and exceeds £100 per week or £5,200 per year, the tenant becomes the duty-holder and must withhold themselves.

Sequencing matters because the agent or tenant is personally liable under regulation 10 SI 1995/2902 if the withholding is not made. PRs who hand the property over to a non-resident beneficiary without addressing the NRL position can leave the letting agent with an exposure that the agent claws back operationally (refusing to release rents, holding the deposit, requesting indemnities). A two-line conversation with the agent about the assent date and NRL1 timing usually defuses the issue at zero cost.

A worked example: the Mehta estate

Mr Mehta dies in May 2026, resident in Birmingham. The estate: main residence in Edgbaston (£540,000, no mortgage), three Selly Oak flats (£210,000 each, two unencumbered, one with a £90,000 mortgage), cash and ISAs (£140,000), defined-contribution pension (£280,000, outside IHT for a 2026 death). He leaves the estate equally to three adult children: Anjali (UK higher-rate, Manchester), Ravi (UK basic-rate, Birmingham), and Karan (resident in Singapore).

RICS Red Book values are commissioned for all four properties; the Selly Oak flats carry a 12 per cent tenanted-occupation discount in the report. The estate is well above any excepted-estate threshold, so the executors file IHT400 with Schedules IHT402 (transferred NRB from Mrs Mehta's 2018 death, fully unused), IHT405, IHT406 and IHT421. Allowances stack to £1,000,000 (NRB £325k + transferred NRB £325k + RNRB £175k + transferred RNRB £175k); the chargeable estate of £590,000 produces IHT of £236,000. The executors elect to pay the IHT on land in ten annual instalments under section 227, with the first instalment of £23,600 paid before the grant. The grant issues 16 weeks after death.

During administration, the PRs collect £43,200 of rent across the three flats. Mortgage interest on the encumbered flat is £4,800; net £38,400 taxed at 20 per cent = £7,680 of PR income tax on the SA900 return. Tenants are notified of the change of landlord within two months; deposits are re-registered within 30 days of the grant; the existing letting agent continues to manage.

The executors decide to sell the mortgaged flat to clear the £90,000 charge and release liquidity for the remaining IHT instalments, and to assent the two unencumbered flats. The mortgaged flat sells in March 2027 for £218,000; the £8,000 PR gain after the £3,000 PR AEA produces CGT of £1,200 at 24 per cent. The two unencumbered flats are assented by AS1 to Anjali and Ravi respectively, no SDLT. Karan takes his one-third share as cash, drawn from the flat-sale proceeds and the cash and ISA balance, which the family agrees suits Karan's preference to avoid UK landlord obligations from Singapore. Had Karan instead taken a flat, the family solicitor would have filed NRL1 four weeks ahead of the assent so the letting agent could pay gross from the assent date.

The estate closes 14 months after death. Total UK tax on the rental pillar: £236,000 IHT (on instalments), £7,680 PR income tax, £1,200 PR CGT. The two assented flats arrive in Anjali's and Ravi's hands at the death-uplifted CGT base cost of £210,000 each, fixing the starting point for any later disposal.

Common executor pitfalls

A small set of recurring operational mistakes in landlord estates:

  • Estate-agent banding instead of a RICS valuation. Not defensible against an HMRC enquiry; the under-valuation cost (CGT on a higher gain at disposal) typically exceeds the surveyor's fee by a factor of ten.
  • Missing the section 3 LTA 1985 change-of-landlord notice. Two months from the change of landlord, in writing, with the new landlord's address. PRs often give verbal notice of the death but never the formal written notification, and the tenant can then withhold rent until it is given.
  • Late deposit re-registration. Two separate 30-day clocks: one from death, one from assent. Both easy to miss; both expose the new landlord to a court order of one to three times the deposit.
  • Distributing income without an R185 voucher. Beneficiaries need R185 (Estate Income) showing the income net of 20 per cent PR-level tax to reconcile their own self-assessment. Missing R185s cause beneficiary errors years later.
  • Forgetting NRL until rent has been paid gross to a non-resident beneficiary. Once the agent pays gross without an approval letter, the agent is personally liable under regulation 10 SI 1995/2902 and will refuse the next month's rent until back-withholding is settled. Filing NRL1 four to six weeks before the assent date avoids it entirely.
  • Treating the assent as a CGT disposal. The assent is not a disposal; the death-uplift fixes the base cost and the beneficiary inherits the same number. Some accountants reflexively create a phantom gain that has to be corrected on enquiry.
  • Ignoring Schedule A1 on offshore-held property. Where the deceased held UK residential property through an overseas company or partnership, Schedule A1 IHTA 1984 looks through the entity and the property is in the estate. The April 2025 residence-based regime extended exposure but did not retract the look-through.

Where to take this next

The executor's process is well-defined but cumulative: small errors at the valuation stage propagate into the IHT400, the CGT computation on a PR sale, and the beneficiary's later CGT position when they eventually sell. The recurring saving moves are (a) getting the RICS valuation right at step 1, (b) sequencing the IHT400 and IHT421 carefully at step 3 to avoid grant delays, (c) using the deed of variation under section 142 IHTA 1984 within two years where the original disposition does not work well, and (d) filing the NRL1 four to six weeks ahead of the assent date when a beneficiary is non-resident.

The decision-level guidance on the IHT side sits in our companion IHT decision framework for property investors, which steps through the planning options available before death; this page is the operational counterpart that runs after death. For the rental-property CGT mechanics in isolation, the CGT on inherited rental property calculation guide works through the worked examples for beneficiary disposals.