Farra is a death administration assistant for UK families. Get step-by-step guidance for registering a death, applying for probate, notifying banks, and managing bereavement admin. From essential documents to practical checklists, Farra simplifies estate paperwork and funeral-related tasks so you can focus on what matters.
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.
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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:
✓ RENT IT OUT if:
✓ SELL IT if:
✓ TRANSFER TO FAMILY if:
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.
Scenario 2: All want to keep and rent out
Solution: Create written rental agreement between co-owners.
Scenario 3: Some want to sell, some want to keep
Solution: Negotiate or seek court order.
Scenario 4: All want to sell - straightforward!
Solution: Proceed with sale.
| Option | Upfront Costs | Annual Costs | Exit Costs |
|---|---|---|---|
| Keep & Live In |
|
| None if main residence (no CGT) |
| Rent Out |
|
| Sale costs PLUS CGT on gains (18-24%) |
| Sell |
| Council tax, utilities, insurance while selling (3-6 months) | N/A (upfront costs are exit costs) |
| Transfer to Family |
| 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:
Reduce rental income tax by claiming all allowable expenses:
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.
Do you pay Capital Gains Tax on inherited property? CGT rates, Private Residence Relief, lettings relief, CGT allowance, how to calculate CGT on property sale after death.
Can you live in inherited property rent-free? Executor rights, beneficiary occupancy rules, council tax, CGT relief, permission needed, living there during probate.
What is Residence Nil-Rate Band? £175K extra IHT allowance when passing home to children. RNRB eligibility, taper threshold, downsizing relief, how to claim.
Complete guide to selling inherited property: when you can sell, probate requirements, Capital Gains Tax, empty property issues, estate agent vs auction.
Inherited property with mortgage? Your options, mortgage liability, taking over payments, selling with mortgage, insurance claims, and tax implications.
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