Accountants for executors and beneficiaries of an inherited property
You have inherited a property, or you are the executor holding one, and you need to decide whether to keep it, let it or sell it. A specialist starts with the probate value, because that figure becomes the capital gains base cost for whoever eventually sells and it is the number the inheritance tax position was built on. Next comes who sells and when: the estate, before the property is passed on, or the beneficiaries after. If it is let, the review covers whose rental income it is in each period and who registers for self assessment. That leaves a written position on the fork in front of you, and the figures your accountant prepares the returns from. Where a deadline applies, such as the 60-day return after a sale, it is dated in the same note. Executors and beneficiaries often live far apart, so the work runs by video call, phone and email.
What lands on your desk
Tax on an inherited property: probate value, selling and letting
The probate value becomes the base cost
Death is not a disposal. The personal representatives are treated as acquiring the property at its market value at the date of death, and a beneficiary who later receives it takes that same figure as their base cost. Only growth after the death can be taxed. That makes the probate valuation a tax number, not a formality: a low figure holds inheritance tax down and hands the family a larger capital gain later. A defensible open market value, evidenced at the date of death, is what a specialist reviews first; the guide to the probate base cost sets out the mechanics.
Selling from the estate or selling after distribution
If the personal representatives sell, the estate pays at the rate set for personal representatives and uses the estate's annual exempt amount, which runs for the year of death and the two following tax years only. If the property is passed to the beneficiaries first, each has their own annual exempt amount and a basic rate taxpayer may fall in the lower band. With several beneficiaries the second route often produces the smaller bill, but it has to be settled before the property is marketed.
Letting it, and registering for self assessment
Rent arising before the property is passed on is the estate's income; rent arising afterwards belongs to the beneficiaries in their shares, and each reports their own. A beneficiary receiving rent for the first time usually has to register for self assessment, the deadline running from the tax year the income first arises. Mortgage interest on a let residential property is a basic rate reducer, not a deduction from profit, so the tax on inherited rent is often higher than a first calculation suggests.
Joint executors, joint beneficiaries and deeds of variation
With more than one personal representative, a sale of the land or a contract for one needs all of them to concur, unless probate was granted to only some of the named executors. Disagreement is what most often collapses a probate sale late on. Separately, a beneficiary can redirect what they inherit within two years of the death, and with the right elections it reads back to the deceased for both inheritance tax and capital gains. It must be for no consideration, or it is only a gift with a seven year clock of its own.
The executor's tax calendar
Inheritance tax normally has to start being paid before probate is granted. After that the dates run from different starting points. A sale of UK residential property where tax is due needs a return and payment within 60 days of completion. The estate's £3,000 annual exempt amount covers the tax year of death and the two that follow, then stops. Where land is sold for less than the probate value within three years of the death, the sale price can be substituted for the death value for inheritance tax. A deed of variation has to be made within two years of the death. A beneficiary who starts receiving rent tells HMRC by 5 October after the end of that tax year.
How we help
What we work out for executors and beneficiaries
The probate valuation reviewed as a tax figure
A property tax adviser from our team re-reads the date of death valuation, the evidence behind it, and how it sits against the inheritance tax the estate reported. Where the property has since sold for less, they check whether substituting the sale price is worth the base cost it costs you.
Keep, let or sell, compared in figures
The estate selling, the beneficiaries selling and keeping the property let are modelled side by side on your numbers, including the annual exempt amounts open to each party and the band each beneficiary sits in. Sanity check the disposal side with the capital gains tax calculator first.
Returns and deadlines prepared and filed
Where a UK residential disposal creates tax, your accountant prepares the 60 day return and the payment, then the self assessment entries that follow. If the property is let, they handle registration and the property pages for each beneficiary.
Deeds of variation checked before signing
Where the family wants to redirect a share, a specialist checks the proposed variation against the two year window, the no consideration rule and the wording of the elections, and confirms what it does to the estate and to the beneficiary giving the share up. The rental income tax calculator covers the other fork, keeping it let.
Not sure which of these applies to you? A free consultation sets out where you stand, with no obligation.
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Frequently asked questions
Where a UK residential property is sold and capital gains tax is due, the return and the payment are both due within 60 days of completion. That applies to personal representatives and to beneficiaries selling in their own names. If the gain is fully covered by losses, private residence relief or the annual exempt amount, a UK resident needs no 60 day return. Where one is due, the gain still appears on the self assessment return for the year, so the two filings are not alternatives.
Where the personal representatives sell land within three years of the death for less than the probate figure, they can claim to substitute the sale price for the value used at death and cut the estate's inheritance tax. It is only worth making if the estate bore inheritance tax, and it has a cost: once a value has been ascertained for inheritance tax it becomes the capital gains base cost, so the claim removes the capital loss on the sale.
Yes, once the income is yours. Rent arising while the estate still holds the property is the estate's; rent arising after your share has been passed to you is yours, in your share of the ownership. Most beneficiaries in that position register for self assessment and file property pages each year. The executor's step by step guide to an inherited rental sets out the order these steps run in.
Within two years of the death a beneficiary can redirect their inheritance by deed of variation, and with the right elections in the document it reads back to the deceased for inheritance tax and capital gains. It cannot be done for consideration, and everyone giving something up has to agree. Families use it to pass a property to the next generation or to route part of an estate to charity. See deeds of variation for landlord estates.
The property devolves on the personal representatives, not on the beneficiaries, and gov.uk is explicit that you should not put a property on the market until probate has been granted. With more than one personal representative, a sale of the land, or a contract for one, needs all of them to concur unless probate was granted to only some of the named executors. Inheritance tax normally has to start being paid before the grant issues, which is why property rich estates stall here.
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