Living in Inherited Property Rent-Free UK: Rights, Tax & CGT Implications 2025

If you've inherited property or are a beneficiary waiting for probate, you may be wondering if you can live in the property rent-free. The answer is usually yes, but there are important legal, tax, and practical considerations. This guide explains your rights, permissions needed, and the valuable tax benefits of living in inherited property.

Can You Live in Inherited Property Rent-Free?

Short answer: Usually yes, but it depends on your situation:

During Probate vs After Probate

During Probate (Before Property is Transferred)

While probate is ongoing, the property legally belongs to the deceased's estate, not to beneficiaries yet. Key points:

• Executor controls the property - they decide who can occupy
• Executor must act in the best interests of the estate and all beneficiaries
• Property must be insured and maintained
• Executor is responsible for paying bills from estate funds

After Probate Grant

Once the property is legally transferred to you:

• You own it (fully or as joint owner with co-beneficiaries)
• You can live there freely
• You're responsible for all bills and maintenance
• If joint owner, need co-owner agreement for major decisions

Getting Permission to Live in Inherited Property

Who You Need Permission From

If you're sole beneficiary:

• Request permission from executor(s)
• Usually granted as you'll inherit the property
• If you're also the executor, you can grant yourself permission

If there are multiple beneficiaries:

• All beneficiaries should agree to you living there rent-free
• Some may want you to pay "rent" to the estate (split between all beneficiaries)
• Get agreement in writing to prevent disputes

What the Written Agreement Should Cover

Request a formal occupancy agreement covering:

• Rent: Usually none (rent-free), but clarify
• Bills: Who pays council tax, utilities, insurance
• Maintenance: Your obligations to maintain property
• Notice period: How much notice to vacate if property needs to be sold
• Duration: How long you can stay
• Access: Allowing viewings if property being sold

Council Tax: Who Pays?

Council tax becomes due as soon as the property is occupied. Here's how it works:

If Property is Occupied (You're Living There)

• Full council tax is due - no exemptions for inherited property
• Who pays depends on your agreement with executor/beneficiaries:
• Option 1: Estate pays from estate funds (executor arranges this)
• Option 2: You pay directly to council

If Property is Empty

• First month after probate: Usually exempt from council tax
• After first month: Full council tax due (no discount in most councils)
• Some councils charge premium rates (extra 50-100%) for properties empty over 2 years

Setting Up Council Tax

1. Contact local council to report the death
2. Inform them who is occupying the property (if anyone)
3. Provide probate documents if requested
4. Set up payment (direct debit in estate name or your name)

The Major Tax Benefit: Private Residence Relief

Living in inherited property as your main residence can save you thousands in Capital Gains Tax.

How Private Residence Relief Works

When you inherit property:

• You receive it at its probate value (date of death value)
• If you later sell for more than this, you normally pay Capital Gains Tax (18% or 24%)
• BUT: If the property was your only or main home, you pay NO CGT

Qualifying for Full Relief

To get full Private Residence Relief (no CGT), you must:

• Live in the property as your only or main residence
• Live there for your entire period of ownership
• Not rent out any part of it
• Not use any part exclusively for business

Partial Relief

If you live there for only part of your ownership, you get proportional relief:

• Automatic "final 9 months" counted as occupied (even if empty)
• Relief = (months lived in + 9) / total months owned × gain = tax-free portion

What Counts as "Main Residence"?

To qualify for Private Residence Relief, you must genuinely live there:

• It's your only home (not a second property)
• You physically live there most of the time
• You've moved your belongings there
• You use that address for official correspondence
• You're registered to vote at that address
• Your GP, dentist, etc. have that address

You CANNOT claim relief if:

• You continue living in your own home elsewhere
• You only visit the inherited property occasionally
• You rent out the property

Utilities, Insurance and Maintenance

Buildings Insurance (Critical)

The property must be insured:

• Executor is responsible for insuring during probate
• Notify insurer that someone is living there
• Occupancy affects the premium and terms of cover
• After transfer, insurance becomes your responsibility

Utilities

For electricity, gas, water, broadband:

• Notify providers of the death
• Request final bills (or continue service in deceased's name temporarily)
• Set up new accounts in your name or estate name
• Agree who pays: estate or you

Maintenance and Repairs

Clarify responsibilities:

• Routine maintenance (cleaning, gardening): Usually your responsibility
• Repairs: Depends on agreement - estate may pay during probate
• Emergencies (leaks, break-ins): Report to executor immediately

Keep receipts for all expenses - may be deductible from estate.

Do You Need to Pay Rent?

Usually no, but there are exceptions:

No Rent Required If:

• You're the sole beneficiary (you'll inherit it anyway)
• You're a joint beneficiary and all beneficiaries agree to rent-free occupancy
• You're living there temporarily during probate

Rent May Be Required If:

• Co-beneficiaries object to rent-free use
• You're not a beneficiary but the executor allows you to live there
• The estate has significant debts (creditors may challenge rent-free use)
• Property is held in trust with specific rental terms

Occupancy License vs Tenancy

If you do occupy the property, use an occupancy license, not a tenancy:

• Occupancy license: Gives you permission to live there, easy for executor to end with notice
• Tenancy: Creates strong legal rights, difficult to remove, not appropriate for inherited property

Planning for the Long Term

If you're living in inherited property, consider your long-term plans:

Option 1: Keep the Property Permanently

• Live there as your permanent home
• If multiple beneficiaries: You'll need to buy out their shares
• Get property valued
• Pay co-beneficiaries their percentage share
• May need mortgage to fund buyout

Option 2: Live Temporarily Then Sell

• Build up Private Residence Relief (reduces CGT)
• Maintain property to maximize sale value
• When ready to sell, get market valuations
• All beneficiaries must agree to sale

Option 3: Rent Out the Property

• If you don't want to live there permanently
• Must get agreement from co-beneficiaries
• Rental income is taxable
• Reduces Private Residence Relief (won't qualify for full CGT exemption if later sold)

Handling Disputes

Common Disputes

• Co-beneficiaries want property sold immediately (you want to live there)
• Disagreement over who pays bills
• Disagreement over length of occupancy
• Executor refuses permission without valid reason

Resolving Disputes

Step 1: Try mediation

• All parties discuss concerns with mediator
• Try to reach compromise
• Put agreement in writing

Step 2: Legal action (last resort)

• Apply to court for directions
• Court decides what's fair considering all beneficiaries' interests
• Expensive (£3,000-10,000+)

Can the Executor Evict You?

Executor can ask you to leave if:

• Property needs to be sold urgently (to pay debts or IHT)
• You're damaging the property
• You're not paying agreed bills
• Majority of beneficiaries demand sale

Executor must give reasonable notice (usually 1-3 months).

Tax Implications Summary

No Tax on Inheriting

• You don't pay income tax or CGT when you inherit property
• Inheritance Tax (IHT) is paid by the estate (if applicable), not by you

Living Rent-Free: No Income Tax

• If you're a beneficiary living rent-free, there's no income tax liability
• You're not "earning" anything - you have an interest in the property

CGT When You Eventually Sell

• You pay CGT only on gain above probate value
• Private Residence Relief can eliminate all CGT if you lived there
• Even partial occupation gives proportional relief + final 9 months

Frequently Asked Questions

Can I live in inherited property before probate is granted?

Yes, if the executor gives permission. The property still belongs to the estate, but executor can allow occupancy if it's in the estate's best interests and doesn't harm other beneficiaries.

Do I pay rent to the estate if I live in inherited property?

Usually no, especially if you're a beneficiary. However, if there are multiple beneficiaries, some may request you pay "rent" to the estate (which would be distributed to all beneficiaries). This is uncommon but possible.

What if I want to live in the property but other beneficiaries want to sell?

You have a few options: (1) Buy out the other beneficiaries' shares, (2) Negotiate a delay in selling (e.g., 6-12 months), (3) Mediation to reach compromise, (4) If no agreement, court can order sale. You cannot prevent sale indefinitely if majority want to sell.

Can I claim Private Residence Relief if I only lived in the property for a short time?

Yes, you get proportional relief. Even living there for 6-12 months can give significant CGT relief. Plus you automatically get the final 9 months counted as occupied. Every month you live there as your main residence reduces your eventual CGT bill.

What if I want to rent out the inherited property instead?

You can rent it out, but: (1) You'll need agreement from all beneficiaries/executor, (2) Rental income is taxable, (3) You won't qualify for Private Residence Relief, meaning you'll pay full CGT on any gain when you eventually sell (minus your annual CGT allowance).