Answers · UK 2025/26
Do I pay Inheritance Tax on inherited property in the UK?
No — beneficiaries don't pay IHT directly. The estate pays IHT (40% above £325,000 + £175,000 RNRB if main home passes to descendants) before distribution. Inherited property is received free of further Income Tax, but future rental income and gains on sale are taxable.
Full answer
UK Inheritance Tax (IHT) is paid by the deceased's estate, not by individual beneficiaries. Calculation: total estate value (assets minus debts/funeral) less Nil-Rate Band (£325,000 per person, transferrable between spouses to £650,000) less Residence Nil-Rate Band (£175,000 if main home passes to children/grandchildren, transferrable to £350,000) — taxed at 40% above. So a married couple can pass on up to £1m IHT-free if a home is involved. Beneficiaries receive their inheritance free of further IHT or Income Tax. However: rental income from inherited property is taxable from acquisition; CGT applies on future sale (base cost = probate value, not deceased's original purchase price — a step-up in basis). If multiple beneficiaries inherit a property they typically need to either sell and split or have one beneficiary buy the others out — careful CGT planning around the 60-day reporting rule applies. Foreign property: separate rules; UK IHT applies to worldwide assets of UK-domiciled individuals; foreign IHT may also apply (double-taxation treaties may help).
Try the calculator
More answers
This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.