Growing Online Income

Tax laws around property inheritance

1.22K 0

Inheritance Tax is a tax relating to the total value of the estate (property, money and possessions) of someone who has died. Although the concept of Inheritance Tax may seem daunting initially, especially just after someone has passed away, the rules surrounding Inheritance Tax can be made simpler.

Initial considerations

If you have inherited property, there are some preliminary things to consider, such as how the property was inherited and if this may affect the application of tax laws. Often, a property is owned by the deceased and passed on through the terms of their will when they die.

If the ownership of property was through a previous ‘joint tenancy’, the surviving partner or owner automatically inherits, or if this was through a ‘tenancy in common’ agreement, the distribution of the share of property owned by the deceased is decided by their will.

However it is passed on, the named executor will need a legal document, called a Grant of Probate (or ‘Confirmation’, in Scotland), to begin to organise any assets such as property.

Existing and upcoming rules

It is also worth considering what you plan on doing with the property – e.g. whether you live in it, sell it, or rent it out. You may not have to pay any inheritance tax initially – such as if the value of the estate is below the £325, 000 threshold, or if everything is left to a spouse or civil partner, charity, or community amateur sports club.

This threshold, set in 2009, is due to change gradually over the years 2017-2020, as determined by the 2015 Budget.  By 2020, the individual threshold will change to £500, 000, meaning that a married couple or civil partners will be able to pass on property worth £1m to their children or grandchildren, with the exclusion of second homes or buy-to-let properties.

Anything over this will be applicable to the 40% Inheritance Tax (36% if 10% or over is left to charity).

Selling a property

If you’re intending on the sale of a property you’ve inherited, you will need to have a Grant of Probate. It may be worth considering finding a company such as Probate Purchasers to help you with this, who have experience in the particular considerations when selling property in probate. This will help you to sell the property as efficiently as possible.

If you do decide to sell or rent out the inherited property, bear in mind that other taxes may apply; such as those on any profit you make on the property when it is sold, or any rental income – an explanation of these other taxes can be found on government pages.

If you have inherited a property and are wondering about the basics of Inheritance Tax, there are places to go for help in simplifying these concepts – whether you intend on living in your inherited property, selling it, or renting it out.

Leave A Reply

Your email address will not be published.