What Happens When You Inherit A House From Your Parents UK?

Written by Myles Hemingway

Myles is our self-confessed ‘word nerd’ and property geek. You’ll find him mythbusting everything from mortgages to maisonettes, as well as giving you our spin on the latest property news and industry trends.

HELP! What happens when you inherit a house?


Inheriting your parent's house is never really something you consider until it's too late. But that's understandable. It's not exactly a pleasant thought. Nevertheless it's a scenario that you should bear in mind, as it can greatly affect your finances later down the line. And when it does happen, it requires you to make a LOT of decisions. Decisions that you can't afford to mess up!

You see, inheriting a house from your parents, especially in the UK, is a BIG deal. Houses are a large asset and require a lot of TLC, both in terms of physical upkeep and cash. Not to mention all the effort you put into earning the cash in the firts place, so it's only wise to plan ahead. Are you going to sell the property? Rent it out as a buy to let? Live in it for a period of time? What's your plan?!

If inheriting a house is something you're yet to plan for, don't worry. Just make sure you keep reading. Do so, and we'll tell you everything you need to know about what happens when you inherit a house, selling an inherited house and even a couple of way on how to avoid inheritance tax too.

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If no will is left who inherits a property?

Inherited property can often be a touchy subject. In some cases it can even cause family conflicts, so to have thorough understanding of it, is nothing but wise. Besides you never know what's around the corner. The thought of inheriting a house may even see your relations plotting against you, in a bid to get their hands on more than their fair share; it's amazing how money can change people.

But of course that's not always the case. In some instances, you may even be the only one in line for inheritance, which should mean the process is relatively straight forward. Nevertheless, you need to be clued up on inheritance law, as it only takes one regulation to drastically affect whether you'll be inheriting a house from your parents, or not. So, we'll waste no time about it - here it is. Your legal rights to inheriting a property when no will is left...

So, the first thing you should know is that if no will is left, then these people will NOT inherit a penny...

  • Carers - No matter how close they were to the deceased, if there's no will, they have NO lawful right to inherit anything.
  • Friends - Be they from down the pub or good family friends, unless specified in a will, they can't claim anything too.
  • Relations by marriage - The same goes for any 'in laws', be they brothers, sisters or distant cousins.
  • Unmarried partners - That's right. Even if you lived with the deceased, you'll need to either be married to them or in a civil partnership to have any right to their estate.


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So you can be doubly sure that you'll be inheriting a house from your parents and plan for the future, here's an assortment of scenarios that should help you put this worry to bed...

SCENARIO: A person who was married but has a surviving partner

OUTCOME: In this case, any property that belongs to their estate will be transferred to their surviving partner, be that their car, pensions property - you name it. Also, do bear in mind that this situation will occur even if a couple is separated, but not divorced.

SCENARIO: The deceased wasn't married, or their partner has previously passed

OUTCOME: This all depends on blood relatives. If the deceased has any left, then their estate will belong to the closest one of them. On the other hand, if there are no blood relatives left, no one will be inheriting a house... apart from the government. This goes even if the deceased was living with someone, but was not married or in a civil partnership with them. So watch out for this one!

SCENARIO: A surviving partner remains, but the deceased has children

OUTCOME: When there's a surviving partner in the mix, but the deceased also has children, then the estate must be worth over £270k for any children to have the right to claim a penny. When the estate does exceed this value, then the children inherit equal shares, but only in the half of the estate which exceeds the £270k threshold. So for instance, two children inheriting an estate worth £280k would split 10k down the middle - £5k each. The other £270k would remain with the deceased's surviving partner. The only instance where grandchildren will inherit anything is if their parent or guardian had passed before the deceased.

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SCENARIO: If the deceased has children, but no surviving partner

OUTCOME: Pretty straight forward this one. In the case that no will is left, the children will automatically inherit the estate as a collective. Then, it'll be simply divided up in-between them. But while this appears to be pretty straight forward now, don't be fooled. Dividing the inheritance will often mean that the house will belong to several people, what with it usually being the biggest asset. And as we all know, selling an inherited property which is jointly owned, can prove to be tricky - especially if you're eager to sell, but your co-owner isn't keen.

SCENARIO: If the person's children are adopted, step-children or from a previous relationship

OUTCOME: Be children from a previous relationship or adopted, by law they will be treated the same when it comes to inheriting a property. However if you're a step-child, here's something to watch out for. You can only inherit a house from your parents if there's a will or if you were what's called legally adopted'. And even in the case you do inherit your parents' house, you'll have to be over the age of 18 before you see any of it. That's unless of course you get married at a younger age. Prior to then you merely have the lawful right to it.

SCENARIO: If there's no surviving relatives

If there's no surviving relatives then estate becomes what's known as vacant goods, or if you want to sound intelligent a ‘Bona Vacantia’ - the Latin translation. What this means is that the estate, including any houses or even a portfolio, will be collected by the Treasury Solicitor, who will then dissolve these assets and pass them onto the Crown.

Do I have to pay taxes if I inherit my parents' house?

If you inherit a house is it taxable?

Yes, it's possible - although it's not guaranteed. Whether you pay tax when inheriting your parents' house really depends on the house itself, as well as the value of the rest of their assets.

You see, just like income tax, inheritance tax has a threshold. At the moment this is set at £325k, however that's not to say that anything above you'll pay tax on if you're inheriting your parents' house. Reason being that in 2017 the government introduced the Residence Nil-Rate Band (RNRB) - a scheme designed to add up to another £175k to the tax-free allowance, providing the deceased left behind a property.

How much of this allowance you're entitled to, depends on how much the house is worth. Anything over 175k and you'll get the full allowance - i.e. only pay inheritance tax on anything above £500k (£325k + £175k). So even if you inherited a house with a value of £200k, you wouldn't necessarily pay tax on the extra £25k unless you were also left assets worth over £300k. Sounds a bit mind boggling we know, but with the average house price in the UK now being in excess of £300k, it's most likely that you'll be able to make use of the full £500k allowance.

FYI: Your RNRB allowance can only be used on one home, which must have been the deceased's main place of residence. Long story short, if you're left an extensive buy to let portfolio, RNRB won't be of any great help. Also in terms of the whole estate, there's another threshold to be aware of too. So for every £2 the total estate is over £2 million, the RNRB allowance will drop by £1.

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Inheritance Tax on a property for the 2020/21 tax year

So to put the above into perspective, on inherited property your tax boundaries are as follows...

  • 175k RNRB allowance - Basically a tax-free credit for £175k of your property's value.
  • £325k personal allowance - A tax-free credit for assets like stocks, savings and potentially leftover pensions too.
  • 40% tax rate - Anything above these thresholds will be taxed at the rate of 40%. For most this will be anything above £500k.

Additional taxes to watch out for when inheriting a house in the UK

While inheritance tax is the major cost to look out for when inheriting a property, you also need to consider other forms of tax too. These that perhaps aren't obvious in first instance, but could become another expense in the future. These various other forms of tax, which we'd suggest you look out for are...

  • Capital Gains Tax - Only if you're selling an inherited property will you be charged Capital Gains Tax. However, it's actually surprising how many inherited houses are sold, particularly when they're inherited by more than one person. So if within that time the property's value has increased, you'll be liable to pay CGT on the difference. Bear in mind this would still be the case even if you were to buy out you sibling's share - in other words, a private sale. Currently CGT on residential property sits at 18%, although there has been talk of a rise during 2021, as a response by the government to recoup money lost through the Covid pandemic.

  • Income tax -While you won't be open to Income Tax from the offset, you could run into it in the future. Rent out an inherited property and income tax is something you'll be liable to pay on your rental income.

Do you pay Stamp Duty if you inherit a property?

If you inherit your parents' house you will NOT have to pay Stamp Duty (SDLT). Stamp Duty is a tax you pay when buying a house, not when it's inherited into your name. That's merely its transferal into your name. The real worry for you here should be Inheritance Tax. Although, that's not to say you won't ever pay Stamp Duty on an inherited property full stop.

If, like with Capital Gains Tax, you choose to buy the house outright (i.e. buy out your sibling), then you could incur a Stamp Duty Charge. While it's a 'what if' rather than 'will', we would advise you to seek financial advice first before making such a move.

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Can I buy my parents' house to avoid tax?

In short, yes.

There are various ways in which you can inherit your parents' house, however buying it to avoid Stamp Duty Land Tax is a way for you to potentially avoid Inheritance Tax. Although it's not full proof.

To do so you'd have to go through a process called gifting, which is much like it sounds. Your parents would sell you their house for below market value and the difference would be classed as a 'gift'. In this case equity is the gift. So for instance, let's say your parents' home is valued at £200k - they could sell it to you for £110k and the other £90k would be classed as a gift. If your parents own the home outright then they can gift you the entire house, even if they still live in it! Do so and you'd avoid any Stamp Duty costs too - another perk when selling an inherited property.

Plus, if your parents are still around 7 years after the gift was made, it'll be exempt from Inheritance Tax too, providing it hasn't been feeding them a monthly income. All sounds tempting, but don't get hyped just yet as by doing so there's a LOT of risks involved for your parents. Here's three...

  • You divorce & your ex spouse claims their share - If you choose to buy your parents' house to avoid inheritance tax, you must ensure your relationship with your partner is solid first! See, if the house is in your name, it's technically your asset even if your parents still live in it. So in the event of a divorce it's likely to be classed as collateral. In other words part of the divorce settlement. All of which means that not only could you stand to lose half its value, but also that your parents could be forced to move out if you fail to reach an agreement with your spouse.

  • Your parents are accused of Deliberate Deprivation of Assets - In short, this means that it's thought that your parents have intentionally gifted you their house in order to receive funding from the local authority. The most common instance of this is care, so if your parents are quite elderly take this in mind. If it becomes apparent that they've quickly decreased their wealth on purpose, they could be accused of deprivation of assets and denied funding in the future. All despite both you and them paying taxes through your lives.

  • You die before your parents - This is one of those unfortunate circumstances what happens when you inherit a house while your parents are still alive and living in it. You see, even though they are your parents, unless you specified otherwise in a will, then the house would automatically go to your spouse or their children. What this means is that your widowed partner or one of your children could evict your parents from their own house, as technically it's their asset. Not ideal, especially if they didn't approve of your other half or there's some tension between them and younger generations.

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FYI: Speaking of state funding, it's also worth remembering that inheriting a house while on benefits could affect how much money you receive from the government, as technically by inheriting a house you've just got richer. So, if there's more than one sibling you may actually be best letting them inherit the house and taking the gold watch instead. Why? Because if your rent's paid for by the state, you could then live in the house as a tenant and funnel the rent through to your sibling. Call it keeping it in the blood.

*Now we'd just like to point out that we're in NO way encouraging you to take advantage of the system, but what we are doing is merely highlighting a potential loophole, which you could take advantage of.

Should I be selling an inherited house?

Whether to sell or rent inherited property is a tough one. You see, what to do with an inherited property all really depends on your situation. In some cases, renting it out over a long period of time would be viable. And then in some other instances, a selling an inherited house would make the most sense. So to help you fathom what is the way for you, we've compiled some of the pluses and minuses of each strategy so you can make an informed decision...

    Renting inherited property

  • By renting you get a monthly income - Rent out a property that you've inherited off your parents and you'll be able to generate a decent second form of income. Something that the business types amongst you would call 'cash flow'. However, that's not to say it's a stable income. By that we mean, you could let your house out for a year and get £800 per month, but that's not to say there won't be times when the house is empty. Plus, getting it full again will likely come with a ream of marketing costs.

  • Buy to let requires experience - Rent out a house you inherited judged on years of experience as a landlord and you should be well equipped for if anything goes wrong. However if you're new to buy to let, jumping straight in at the deep end (practically winging it) may not be the wisest move. You can only learn so much watching YouTube videos! For buy to let to work you need to be able to recognise a good tenant in the flesh, as well as a good agent for that matter. Fail to do so and the house you've inherited may turn out to be more of liability than a money-maker.

  • Rental income could affect your tax bracket - Rent a house and yes, you get another form of income, but is that income really worth it? You see this all depends on your tax situation. Take the current tax brackets - earn up to £50k and you'll pay 20% tax. However if you earn £50,001k this doubles to 40%. A rule that could rip the potential out of renting a inherited property full stop.

  • Selling inherited property

  • Less stress and responsibility - Sell a home you inherited and you don't need to worry about any of the responsibilities that come with being a landlord. Let's face it, having a call at 4am to say the boiler is broken isn't exactly pleasant. Neither is having to foot the bill. So by selling a property you inherited, not only do you get the cash straight away, but you can also predict your future expenses. None.

  • You can invest in what you know - One of the golden rules of investing is to invest in what you know. Then, chances are you'll make more accurate investments and more likely receive a healthy return. Therefore, by selling you could actually make more money. Why have equity tied up in a house, when if you invested in the stock market, you could turn £50k in £100k overnight?

  • Selling isn't as slow as it's made out to be - Yes, there's no denying that the open market is slow. You've got the hassle of choosing your agent, having pictures taken, listing it on property portals, viewings, offers, offer amendments, conveyancing - the list goes on. However, we're not all that slow. Go off-market and you'll soon find selling a home you inherited isn't actually as complex as it first seems.


Being an industry leading cash buyer of property, we can buy an inherited house before an agent can even get one on the market. That's right - offer, sale, legals, completion all in as little as 7 days! We don't even charge you any fees either. So selling a home you inherited to us, means you'll have no pricy solicitors or survey costs to cover whatsoever.

So don't be misled into thinking that selling a house after the death of a parent needs to be a chore. It doesn't. In fact, selling a house quickly is as easy as 1-2-3.

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