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Four options: (1) Keep and live in—no CGT if main residence, but £3,000-£5,000/year costs, (2) Rent out—rental income taxed 20-45%, CGT 18-28% on sale, landlord duties, (3) Sell—no CGT if within 2 years at probate value, estate agent 1-3%+VAT, solicitor £1,000-£2,000, (4) Transfer to family—may trigger CGT. Multiple inheritors must all agree. Private Residence Relief eliminates CGT if lived in.
Move into the property as your main residence.
✓ Advantages:
✗ Disadvantages:
Tax Impact:
Private Residence Relief: If property becomes your only or main residence, the entire period you own it is exempt from capital gains tax when you eventually sell. This can save tens of thousands in tax. Must actually live there as main home - occasional visits not enough. Learn more about CGT on inherited property.
Keep property as investment and become landlord.
✓ Advantages:
✗ Disadvantages:
Tax Impact:
Income Tax: Rental income minus allowable expenses (mortgage interest, repairs, insurance, agent fees) taxed at 20/40/45%. Example: £15,000 rent - £5,000 expenses = £10,000 taxable income. At 40% = £4,000 tax.
Capital Gains Tax: When eventually sell, pay CGT on increase in value from probate valuation. Residential CGT rates: 18% (basic rate) or 24% (higher rate) since October 2024. See our guide on inherited rental property as landlord.
Put property on market and distribute cash proceeds.
✓ Advantages:
✗ Disadvantages:
Tax Impact:
Capital Gains Tax: Usually none if sell within 2 years at similar price to probate value. Market fluctuations within 2 years rarely enough to trigger CGT after the £3,000 annual allowance. If property significantly increases in value or you delay sale beyond 2 years, CGT may apply on gain above allowance. Read our full guide on selling an inherited house.
Gift your inherited share to spouse, children, or other family.
✓ Advantages:
✗ Disadvantages:
Tax Impact:
Capital Gains Tax: Transfer counted as disposal at market value. If property increased in value since probate valuation, you pay CGT on gain above annual allowance. Transfer to spouse: CGT-free. Recipient takes over your baseline cost (probate value) for calculating their future CGT.
Use this framework to evaluate your best option:
✓ KEEP & LIVE IN IT if:
- You currently rent and need housing
- Property is in suitable location for work/family
- Property size and condition works for your needs
- You can afford running costs (£3-5K/year minimum)
- Sentimental value is important and property suits you practically
- You're sole inheritor or co-owners agree to you buying them out
✓ RENT IT OUT if:
- Property in good rental area (student area, city centre, commuter belt)
- Expected rent covers mortgage and costs with profit (aim for 5%+ yield)
- You're willing and able to handle landlord responsibilities
- You want investment income and property appreciation (long-term strategy)
- You're not sure what to do yet - renting keeps options open
- If multiple inheritors, all agree to rent and have written agreement on income/cost split
✓ SELL IT if:
- Property doesn't suit your needs and won't be rental
- You need cash now (debts, house deposit, investment)
- You don't want landlord hassle or maintenance burden
- Multiple inheritors with different views - cleanest solution
- Property needs significant repairs you can't/won't fund
- Running costs unaffordable and property won't be profitable rental
- You want emotional closure and clean break
✓ TRANSFER TO FAMILY if:
- Spouse or children desperately need housing (and you don't)
- You're financially secure and want to help family member
- Transfer is to spouse (CGT-free)
- Keeping property in family very important to you
- Property value small enough that losing inheritance not significant impact
- You understand tax implications and accept them
Inheriting property with siblings or other beneficiaries creates complexity:
Scenario 1: One wants to live there, others want cash
Solution: Person living there buys out others' shares.
- Get independent valuation (RICS surveyor, £200-£500)
- Calculate buyout amount (e.g., property worth £300K, 3 siblings = £100K each. One pays £100K to each of other two.)
- Person buying out may need mortgage for buyout amount
- Solicitor handles transfer (£500-£1,000)
- Buying sibling may pay stamp duty on share purchased (if total value over threshold)
Scenario 2: All want to keep and rent out
Solution: Create written rental agreement between co-owners.
- How split rental income (usually proportional to ownership shares)
- How split costs (repairs, agent fees, insurance, mortgage)
- Who manages property or use letting agent
- Decision-making process (majority vote? unanimous?)
- What happens if one wants to sell later
- Get solicitor to draft agreement (£500-£1,500)
Scenario 3: Some want to sell, some want to keep
Solution: Negotiate or seek court order.
- Try mediation first (£1-3K, often successful) to reach compromise
- Options to consider: Delayed sale (e.g., rent for 2 years then sell), One party buys out others, Rent and reassess annually
- If cannot agree, any co-owner can apply under Trusts of Land and Appointment of Trustees Act 1996 for court order
- Court usually orders sale unless exceptional circumstances (disabled sibling living there, etc.)
- Legal costs £5,000-£15,000+ - avoid if possible
Scenario 4: All want to sell - straightforward!
Solution: Proceed with sale.
- All co-owners must sign contract and transfer deed when selling
- Agree on: estate agent (get 3 quotes), target price, timeline
- Net proceeds split according to ownership shares after paying costs
- Cleanest solution if all in agreement
| Option | Upfront Costs | Annual Costs | Exit Costs |
|---|---|---|---|
| Keep & Live In | • Title transfer: £500-£1K • Removals: £500-£2K • Repairs/decoration: £1-10K | • Council tax: £1,200-£3,000 • Utilities: £1,500-£2,500 • Insurance: £300-£800 • Maintenance: £500-£2,000 • Total: £3,500-£8,300/year | None if main residence (no CGT) |
| Rent Out | • EPC: £60-£120 • Gas safe: £80-£150 • EICR: £150-£300 • Landlord insurance: £200-£400 • Agent setup: £200-£500 • Furnishing (if needed): £5-15K | • Agent fees: 10-15% of rent • Insurance: £200-£400 • Repairs: £500-£2,000 • Safety cert renewals: £200 • Offset by rent income! | Sale costs PLUS CGT on gains (18-24%) |
| Sell | • EPC: £60-£120 • Estate agent: 1-3% + VAT • Solicitor: £1,000-£2,000 • On £300K property: £6-12K total | Council tax, utilities, insurance while selling (3-6 months) | N/A (upfront costs are exit costs) |
| Transfer to Family | • Solicitor: £500-£1,500 • SDLT (recipient pays): 0-5% • Your CGT: 0-28% on gains | Recipient's responsibility | N/A (already transferred) |
If considering keeping property, move in ASAP and make it your main residence. This maximizes Private Residence Relief:
Example: Inherit £400K house, live in it 5 years, sell for £500K. No CGT because it was your main residence. If you'd rented it instead: £100K gain minus £1,500 allowance = £98,500 taxable × 24% = £23,640 CGT.
If you're going to sell eventually, do it within 2 years of death:
Strategy 3: If renting, maximize deductions
Reduce rental income tax by claiming all allowable expenses:
- Mortgage interest (can deduct as expense or get 20% tax credit)
- Repairs and maintenance (not improvements - those are capital)
- Insurance, letting agent fees, legal fees, accountant fees
- Travel costs for property visits
- Utilities and council tax if you pay them (typically tenant pays)
Keep meticulous records. Consider hiring accountant (fee is deductible expense).
If you have capital losses from other assets (sold shares at loss, etc.), you can offset them against property gain:
❌ Making emotional decisions without financial analysis
Sentimental value is valid, but don't keep property you can't afford or that doesn't suit your needs. Run the numbers.
❌ Not getting professional property valuation
Probate valuation is crucial tax baseline. Undervaluing causes HMRC penalties; overvaluing means excess IHT now. Get it right.
❌ Letting property sit empty long-term
Empty property costs money (council tax, insurance, utilities, deterioration) with no income. Decide quickly and act.
❌ Renting without proper landlord compliance
Must have EPC, gas safety certificate, EICR, proper deposit protection. Fines up to £30,000 for non-compliance.
❌ Not getting written agreement with co-inheritors
Verbal agreements cause disputes. Get solicitor to draft formal agreement covering all scenarios.
❌ Ignoring capital gains tax implications
If renting long-term, CGT on eventual sale can be £20K-£50K+. Factor this into your keep-vs-sell analysis.
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