The first thing to know about inheriting a UK house is what is NOT your problem. Inheritance tax on the estate is the executor's problem, settled from the estate's assets before the title transfers to you. Receipt of the property is not a taxable event for you. No income tax, no capital gains tax, no inheritance tax bill arrives in your name.

The second thing to know is the single most important tax fact about an inheritance: the probate value at the date of death becomes your capital gains tax base cost. Per TCGA 1992 s.62(1)(a), you are deemed to acquire the asset at market value at the date of death. The gain accrued during the deceased's ownership is wiped out. Years from now, when you might sell, the chargeable gain is measured against probate value, not against whatever the deceased originally paid.

From there your decision splits three ways. Keep and occupy as your main residence (PPR runs from your move-in date). Keep and let (rental income at your marginal rate; future CGT against probate value). Or sell, typically within the first year (usually at or near probate value with no chargeable gain and no 60-day reporting obligation).

This page is the beneficiary's decision pillar. The Latimer-family £550,000 worked example threads all three routes plus the deed of variation variant.

What the executor does (and what you don't)

Most beneficiaries arrive at this page confused about who pays IHT. The answer is the estate, through the personal representatives (executors named in the will, or administrators where there is no will or no acting executor).

The executor process at orientation depth:

  1. Personal representatives apply for the grant of probate (will) or letters of administration (intestacy). The grant gives them legal authority to deal with the deceased's assets.
  2. They complete the IHT400 IHT return (or the shorter IHT205/IHT207 for excepted estates), pay any IHT due (or elect the 10-year instalment option under IHTA 1984 s.227 on land), and obtain IHT421 / IHT442 clearance.
  3. They settle estate debts in the statutory order of application of assets under Administration of Estates Act 1925 s.34 + Schedule 1 Part 2 (secured creditors first; then funeral and administration costs; then unsecured creditors; then specific legacies; then residuary legacies).
  4. They execute the Assent (form AS1 at HM Land Registry) transferring legal title of the property to you. No SDLT on the assent (the transfer is not for consideration in the SDLT sense).
  5. You become registered proprietor at HM Land Registry. The legal and beneficial title now sits with you.

Throughout the process you are largely a spectator. Your contact with the executor is for documentation (sometimes asked to consent to certain decisions) and eventually for distribution. The executor is liable for IHT under IHTA 1984 s.226; you are not.

The Latimer-family worked example

Persona: Mr Latimer, son, aged 47, owns his own house in Leeds (worth £350,000, with PPR fully covering any prior gain), salaried higher-rate taxpayer. His mother died in March 2026. Her estate: family home in Harrogate at probate value £550,000 (her 1995 acquisition cost £180,000); cash and ISA £150,000. Mother had full NRB available (£325,000) plus full RNRB (£175,000) where the home passes to lineal descendants, giving £500,000 of combined allowance.

Net estate £700,000. Above combined allowances by £200,000. IHT at 40% on £200,000 = £80,000 paid by the executor from the cash element (or by 10-year instalments under s.227 on the land slice if cash is short). After IHT settled, the son receives the house plus the residual cash of approximately £70,000.

The son's three routes:

Route A: keep and occupy (PPR)

The son sells his Leeds house in late 2026 (no CGT, full PPR on his prior occupation under TCGA 1992 s.222) and moves into the Harrogate house in February 2027. From the move-in date, PPR runs prospectively under s.222 and s.223.

  • The pre-occupation void (March 2026 to February 2027, approximately 11 months) does NOT qualify for PPR by itself.
  • The last 9 months of any future period of ownership qualifies for PPR regardless of occupation under TCGA 1992 s.223(1) and s.223(2).
  • On eventual sale, PPR covers the occupied period plus the last 9 months. The non-occupied period (death to move-in, minus the last 9 months overlap if applicable) is chargeable proportionately.
  • If the son occupies for 15 years and then sells at £900,000: gain £350,000 (above probate value £550,000); chargeable proportion = void months over total ownership months, after subtracting any last-9-months overlap. Typically the void is a small fraction of total ownership and most of the gain is PPR-covered.

Route A is the right answer where the son actually wants to live in the Harrogate house and is willing to give up his Leeds residence. The void-period CGT is a small price for full prospective PPR.

Route B: keep and let

The son retains his Leeds residence and lets out the Harrogate house to long-term tenants from June 2026.

  • Rental income taxed at the son's marginal rate (40% higher rate) on ITTOIA 2005 Part 3 property-business basis.
  • No Section 24 finance-cost restriction applies if there is no mortgage on the inherited property; the issue arises only if the son later remortgages to extract equity.
  • Future disposal triggers CGT on the gain above probate value £550,000. No PPR (it is not the son's main residence).
  • On sale at £900,000 ten years later: gain £350,000 at 24% higher residential rate = £84,000 CGT, with 60-day CGT-on-property-disposal return and payment on account required.

Route B is the right answer where the son wants the rental yield (and the long-term capital appreciation) but does not want to live there. The route trades immediate tax efficiency for ongoing landlord administration and future CGT.

Route C: sell within twelve months

The son lists the house immediately, sells four months after probate vests for £555,000.

  • Chargeable gain £5,000 (£555,000 minus £550,000 probate value), minus selling expenses (estate-agent and legal fees ~£10,000) = no chargeable gain.
  • No 60-day CGT-on-property-disposal return required because no chargeable gain.
  • Cash proceeds £545,000 net land in the son's account.
  • No further tax. The son adds the cash to his own assets and the inheritance is fully closed.

Route C is the most common route in practice. It is the right answer where the son does not want to live in the house and does not want to become a landlord. Sold near probate value, the transaction is typically tax-free for the beneficiary.

Variant: deed of variation to skip a generation

Suppose the son already has substantial assets and is in his late 40s. Adding £550,000 of property to his estate compounds his own future IHT exposure. Within two years of his mother's death, the son executes a deed of variation under IHTA 1984 s.142 redirecting the inheritance to his own two children (his mother's grandchildren, aged 22 and 25).

  • For IHT (s.142): the variation reads back to the mother's estate. The grandchildren are treated as direct beneficiaries. No fresh PET by the son; no fresh seven-year clock.
  • For CGT (TCGA 1992 s.62(6)): the redirection is NOT a disposal by the son. The grandchildren acquire at probate value (£550,000), preserving the s.62(1)(a) death uplift.
  • Each grandchild owns a 50% TIC share at probate value £275,000. They can hold (using their own NRB and RNRB on eventual death decades hence) or sell now at break-even.
  • The son's own estate is £550,000 lower. The IHT exposure on the son's eventual death falls by £220,000 at 40% rates.

The deed of variation is the only mechanism in UK tax that achieves both CGT uplift preservation AND IHT savings (the next-generation saving on the son's eventual death) in one structure. For full mechanics see our deed of variation property estate page.

The 60-day CGT reporting trap

For UK residents disposing of UK residential property, Finance Act 2019 Schedule 2 as amended by Finance Act 2021 s.23 requires a CGT-on-property-disposal return AND payment on account within 60 days of completion, where there is a chargeable gain.

Three points the amateur reader often misses:

  • The 60-day window runs from completion (the date you receive the proceeds), not from exchange.
  • The obligation triggers ONLY where there is a chargeable gain. Sales at or close to probate value generally produce no gain (or a gain within the annual exempt amount, currently £3,000 for 2025/26) and no return is required.
  • The 60-day return is not the final settlement. Final reconciliation runs through the annual self-assessment return (SA108 CGT supplementary pages), where adjustments are made and any over-payment is refunded.

The practical filter: if you are selling the inherited house within twelve months at near-probate-value, you almost certainly have no 60-day obligation. If you are selling years later at materially above probate value, you almost certainly do. The 60-day window is short and the penalties for missing it (interest plus late-filing penalty stack) are real.

Joint inheritance and TIC mechanics

Where the will (or intestacy) leaves the house to multiple beneficiaries, you each take a defined undivided share, typically equal unless the will specifies otherwise. The default is tenants-in-common (TIC); each beneficiary owns a separate share that can be sold, gifted, or willed.

Practical issues with joint inheritance:

  • Disagreement on whether to keep or sell. Any one beneficiary can apply under TOLATA 1996 s.14 for an order of sale. Per Bagum v Hafiz [2015] EWCA Civ 801, the court exercises discretion looking at occupation, alternative accommodation for other parties, and the purpose for which the property was acquired.
  • Buy-out by one beneficiary. Common where one wants to occupy and another wants the cash. Requires agreed valuation; the buying beneficiary pays cash to the seller; legal title is transferred via TR1 from the joint registered proprietors to the buying party.
  • Tenancy or letting between siblings. One sibling occupies; pays rent at market value to the others; the others declare rental income on SA. Rare but workable.
  • Phased sale or partition. Where the property can be physically divided (a duplex, a property with separable units), partition orders are available under TOLATA. Operationally fiddly and rare in practice.

Mortgage on the inherited house

The mortgage is paid from the estate before distribution per AEA 1925 s.34 and Schedule 1 Part 2. Secured creditors have first call on the secured asset.

Three common scenarios:

  • Solvent estate with liquidity. Cash in the estate clears the mortgage; the unencumbered property passes to the beneficiary. Most common case.
  • Solvent estate without liquidity. £550,000 house, £20,000 cash, £200,000 mortgage. Executor must either sell the house to clear the mortgage (and you inherit the residual cash) or you arrange to take over the mortgage with the lender's consent. Lender assesses your income to service the loan; if you cannot service it, forced sale is common.
  • Insolvent estate. Estate's debts exceed its assets. The property goes to satisfy creditors; the beneficiary receives nothing from the estate. The IHT calculation never gets started because there is no chargeable estate to tax.

The standard planning answer for the illiquid-estate case is a life insurance policy written in trust outside the estate, which provides liquidity for the mortgage payoff at exactly the moment it is needed. Uninsured mortgages on family homes are the most common cause of forced sale in inheritance.

Intestacy: when there is no will

Under the Administration of Estates Act 1925 ss.45-49 (as amended by the Inheritance and Trustees' Powers Act 2014), the distribution where there is no will:

  • Spouse and issue. Spouse takes personal chattels, statutory legacy £322,000 (SI 2023/758 from 26 July 2023), and half the residue absolutely. Issue (children) share the other half on statutory trusts.
  • Spouse, no issue. Spouse takes the entire estate.
  • No spouse, issue. Issue take the entire estate equally on statutory trusts.
  • No spouse, no issue. Parents, then full siblings, then half siblings, then grandparents, then full aunts and uncles, then half aunts and uncles, in the hierarchy at s.46.

The surviving spouse can elect under AEA 1925 Schedule 2 to take the matrimonial home in or towards satisfaction of their entitlement, paying equality money if the home exceeds their share. Without that election the home is sold and the proceeds distributed in line with the statutory shares.

For most beneficiaries the practical takeaway is that intestacy rarely matches what the deceased would have wanted. If you are reading this page because someone in your family does not have a will, the cheapest single piece of estate planning is to encourage them to make one.

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If the property is in Scotland

Scottish succession law differs materially from the English and Welsh framework. Under the Succession (Scotland) Act 1964 and the Succession (Scotland) Act 2016:

  • The surviving spouse has prior rights: statutory entitlements to dwelling house, plenishings (furniture and household contents), and a cash sum.
  • The surviving spouse and children have legal rights: a statutory share of the moveable estate (i.e. not heritable land but cash, investments, chattels).
  • Where there is a will, legal rights can be exercised against the will (the spouse or child can elect to take their legal rights instead of any testamentary provision).
  • Scots conveyancing law (the Land Register of Scotland, Sasines, dispositions) replaces the Land Registry / Assent / TR1 framework of England and Wales.

For Scottish-situs property, refer to a Scottish-law solicitor early. The English and Welsh framework above does NOT apply. Where the deceased had assets in both jurisdictions, the cross-border framework needs coordinated handling.

The decision sequence

If you have just been told you are inheriting a UK house, work through these questions in order:

  1. Is there a will? If yes, confirm the executor has been identified and probate has been (or is being) applied for. If no, the intestacy rules apply and the personal representative is the administrator.
  2. What is the probate value of the property? Get this in writing from the executor as soon as the estate's IHT400 is filed. This is your CGT base cost.
  3. What is the IHT position of the estate? The executor settles it; you do not. But understanding whether IHT is paid in full up-front or by 10-year instalments under s.227 affects when you can expect clear title.
  4. Is there a mortgage on the property? If yes, what is the estate's liquidity position? If illiquid, plan for the possibility of forced sale or owner-occupier refinancing.
  5. Do you want to occupy, let, or sell? The decision sets the downstream tax position for years. Reconfirm against the three-route framework above.
  6. Are you in your 40s or 50s with substantial assets of your own? If yes, consider a deed of variation within two years to skip a generation.
  7. Are you inheriting with siblings or other beneficiaries? Have the conversation early about whether you all want the same thing. TOLATA litigation is expensive and erodes the value you are inheriting.
  8. Is the property in Scotland? If yes, the rules above do not apply. Get Scots-law advice early.

The bigger picture

Inheriting a UK house is a receiving-side event. The executor handles inheritance tax from the estate. You receive the title clean (or, where the estate is illiquid, encumbered by an existing mortgage that the lender will need to consent to your assumption of). Your CGT base cost is the probate value. Your three structural routes are keep and occupy, keep and let, or sell. Your one piece of post-receipt flexibility is the two-year deed of variation window.

The single most overlooked move in beneficiary planning is the deed of variation. Within two years of death, with the right elections, you can redirect your inheritance to your own children, equalise between siblings, redirect to charity, or settle into a trust. The redirection reads back to the deceased for both IHT and CGT purposes. There is no fresh seven-year clock and no fresh CGT crystallisation. For mid-life beneficiaries with substantial assets of their own, the DoV is often the right answer.

The single most common mistake is the assumption that the inheritance compounds the beneficiary's own estate without thinking through whether the receiving family wants the asset at all. Many inherited properties are sold within twelve months; many are converted to rentals without proper modelling of the long-term CGT against probate value; some are kept as second homes that accumulate void-period CGT. The choice is yours. The framework above is the structure inside which the choice gets made cleanly.