Do you pay Stamp Duty on inherited property?
We're here to answer all your inherited property questions, including whether you need to pay Stamp Duty on inherited property...
When it comes to inherited property, there are a lot of questions which can be asked. Do I need to pay Inheritance Tax? How much Inheritance Tax do I need to pay? Can I sell my inherited property? And do I need to pay Stamp Duty on an inherited property?
Aside from all the questions, you also have to come to terms with your emotions. It’s never an easy time for anyone and no one can prepare you for this situation.
Everything is made harder when you don’t have anyone to help and answer your questions for you, which is why we’re here to do the job!
We want to help you with your inherited property questions, to simplify the process as much as we can and give you tips on how you can sell your inherited property, and the best ways to do it.
What is Stamp Duty?
Stamp Duty is a tax you pay when you buy a property over a certain price. You pay the tax when you:
buy a freehold property
buy a new or existing leasehold
buy a property through a shared ownership scheme
are transferred land or property in exchange for payment, for example you take on a mortgage or buy a share in a house
There is a threshold where you start to pay Stamp Duty and buying a property under this threshold will mean you don’t have to pay it at all. The current Stamp Duty threshold is £500,000, but this is due to change when the ‘Stamp Duty Holiday’ ends on 30th June 2021.
If you want to find out more about Stamp Duty, you can read more here.
Do you pay Stamp Duty on inherited property?
No, as it’s something that has been passed onto you, you don’t pay Stamp Duty on inherited property. You also don’t pay Income Tax or Capital Gains Tax when you have inherited a property.
A tax you’re likely to pay on inherited property is Inheritance Tax. Inheritance Tax is paid when the value of the deceased’s estate is above the £325,000 threshold. The standard rate of Inheritance Tax is 40%.
You won’t have to pay Inheritance Tax on inherited property if the part of the estate over the threshold has been left to a spouse, civil partner, charity, or community amateur sports club.
How much tax do you pay on inherited property?
As we mentioned earlier, if the inherited property has been passed onto a spouse or civil partner, there will be no Inheritance Tax to pay. If, however, the house is left to someone else in the will, for example, children or a friend, then this will count towards the value of the estate.
If the deceased fully owned the property, or a share in the property, then the tax-free threshold can increase to £500,000 if the property is left to their children or grandchildren.
If the value of the estate is worth less than £2 million, this can also cause the tax-free threshold to increase to £500,000.
Also, there will be no tax on pay on the inherited property if it was given away 7 or more years before the death. If it was given away within 7 years, there will still be Inheritance Tax to pay, but it will be subject to the ‘7-year rule’.
The 7-year rule applies to ‘gifts’ that were given up to 7 years before passing. If in this time, the inherited property was gifted to someone, then it will be subject to tax, in accordance with the 7-year rule.
The amount of tax to pay following the 7-year rule will be calculated according to a sliding scale known as ‘taper relief’. The taper relief to calculate the percentage of tax payable is as follows:
|Years between gift and death||Tax paid|
|Less than 3 years||40%|
|3 to 4 years||32%|
|4 to 5 years||24%|
|5 to 6 years||16%|
|6 to 7 years||8%|
|7 or more years||0%|
Is Stamp Duty payable on transfer of property between family members?
If a property with no mortgage is transferred between family members, whether that property is inherited property or a property you already owned, there will be no Stamp Duty to pay. Even if the property is transferred to someone who isn’t a family member, there will be no Stamp Duty to pay.
However, if the property is sold to a friend or family member, there will be Capital Gains Tax to pay, if a profit is made. Capital Gains Tax is paid when you sell an asset that has increased in value, meaning you make a profit. The tax is paid on the profit only.
If a property is transferred and there is a mortgage attached to the property, causing the new owner to be responsible for the house repayments, then Stamp Duty Tax may be payable.
Even if no money was paid by the ‘new owner’ for the property, due to the fact the new owner now has responsibility for the house repayments, they will need to pay Stamp Duty.
Do I pay tax when I sell an inherited property?
If you sell an inherited property and it has increased in value since you inherited it, meaning you make a profit, then you will have to pay Capital Gains Tax. You only pay Capital Gains Tax if you make a profit on a property which isn’t your main home.
If inherited property means you now own two homes, you will have to nominate one of the properties as your ‘main home’ and inform HMRC of this decision, within 2 years of inheriting the second property.
If you don’t alert HMRC of your decision and sell the inherited property, or your ‘main’ property, HMRC will make the decision for you on which was your main home and charge Capital Gains Tax accordingly.
How do I sell an inherited property?
Legally, before you can sell inherited property, you need to establish a relationship with it. In order to do this, you will need to apply for probate.
Probate includes distributing assets as set out in the deceased’s will. The main point of probate is to give a person, or multiple people, the legal authority to deal with a deceased person’s estate.
However, there are exceptions, where you may not need to undergo the probate process.
These exceptions are:
If the person who died has jointly owned/shared land, or property where it automatically passes to surviving owners. For example, if the deceased was part of a joint tenancy agreement
If the person who died only has savings and/or premium bonds
The probate process can be a confusing and long process, with it potentially lasting up to 9 months! We suggest enlisting the help of a solicitor – having experience on your side will help make the process less stressful for you and as quick as possible.
Once the probate process has taken place and you are officially the owner of the inherited property, you will now be able to sell it.
Remember, as we said earlier, you won’t need to pay Stamp Duty on inherited property when you inherit it or sell it!
When you take ownership of an inherited property, it’s important to remember you are responsible for the maintenance and utility bills. This is something you need to take into consideration when deciding how to sell the property.
Having to take care of the inherited property and its bills can rack up a significant amount of money, making a quick house sale an attractive option.
With the inherited property comes emotional attachment, which often leads to people wanting to sell it fast to try help come to terms with their emotions and move on with their next chapter.
When it comes to a fast house sale, you have a couple of options. Although selling through the open market with an estate agent may be the first idea which comes to mind, this most likely won’t help you sell your house fast.
According to The Advisory, the average time it takes to sell a house in the UK is 18 weeks. This means you’ll likely be ‘stuck’ with your inherited property for over 4 months before it sells, racking up multiple bills and also acting as a reminder of someone you have lost.
As an alternative to selling through the open market with an estate agent, you could look to sell your inherited property through auction or with a ‘cash house buying’ company, who specialise in getting you a quick house sale.
At auction, you will only get buyers with their finances already in place. After the hammer comes down, contracts are exchanged and the buyer will have between 20 to 28 days to complete, meaning you will know you’ll be selling your inherited property fast. However, the buyer is still able to pull out and forfeit their 10% deposit. Even at auction you can’t guarantee a buyer!
With a fast house sale company, all you have to do is tell them about your inherited property and they will give you a CASH offer, with some being able to complete in as little as 7 days! These companies are also a guaranteed buyer, so there’s no worry of them pulling out.
At both auction and quick house sale companies, you will only get serious buyers – YES, no time wasters! You also won’t get gazundered with either option, as when the price is agreed it’s guaranteed!
At auction, you’re likely to end up with the hammer coming down on a lower price for your property, compared to what you could get on the open market. You will also have to pay a commission of this sold price to the auctioneer, whilst also paying for advertising costs, room hire and all your own legal fees.
At cash house buying companies, you can be offered up to 80% of the current market value, with no worry of them pulling out of the deal. Unlike at auction, you won’t have to pay a single penny! Yes, they really will cover those legal fees for you!
At auction, you will also need to host multiple open days for interested parties to view the inherited property, meaning you will need to constantly ensure the property is in good shape. BUT, at a quick house sale company they only require one quick viewing, just to ensure the price agreed is reflective of the property.
Some quick house sale companies will also help with the probate process and arranging removals from the inherited property, to try minimising the upset to you.
If a cash house buying company is something you’re after to get you a fast sale, then we’re here to help!
Here at The Property Buying Company we will buy your inherited property for CASH, in as little as 7 days! We have over 50 years combined experienced, meaning we know how difficult it is when trying to sell and part ways with a property you’ve inherited.
We will help you go through the probate process, arrange removals and also cover all your legal fees – anything we can do to help make this process a little bit easier!
Give us a call or fill in our online form today to receive a no-obligation cash offer for your inherited property, to help you sell it FAST and move on with your next chapter.