Is There a Time Limit on Selling Inherited Property?

Inheriting a property can be a daunting task.

You likely only received it after a loved one passed away, and now you have a considerable asset to deal with.

It’s no wonder that you may have many questions running through your brain.

One may be: what is the holding period for inherited property?

Here, we’ll examine how quickly you can sell a property, the barriers you may encounter, and the taxes you may need to pay. Let’s get started.

What is an inherited property?

An inherited property is one that you receive from someone who has passed away.

This will either be automatically left to you because you are the closest living relative or passed to you via a will.

Once you have inherited the property, you will be the new owner. You will have many options for the inherited property and can do whatever you want with the home.

However, there are a few things that you need to be aware of.

What is the holding period for inherited property?

The holding period refers to how long you own a property before it is sold.

No laws indicate how long you can take or how quickly you need to sell an inherited property. The only factor that affects it is probate.

Probate is the legal process you must go through to administer an estate. For simple cases, probate may only take a few months. At this time, you wouldn’t be able to sell the property.

You may also need to pay inheritance tax if the estate (including the property) is valued at over £325,000.

The probate process can be avoided if the property is in joint names.

For example, if the surviving spouse wants to sell the home and downsize, the property would automatically pass to them, and probate wouldn’t be required.

In this case, the property could be sold immediately.

However, if probate is required, it must be completed before selling or transferring any assets.

Tips for selling an inherited property

Selling an inherited property is especially difficult if you have never sold a property before. Here are some tips to help you sell your inherited property successfully.

Get a valuation

You will need to get a valuation of the probate property.

This will first be required to calculate whether inheritance tax needs to be paid. And secondly, it will be necessary for the probate application.

Clear out the property

Decide what personal effects should be kept and which can be given away or donated.

After you’ve emptied out the probate property, it’s a good idea to give it a deep clean or have a professional company do it for you.

Decide whether to repair or redecorate

You then need to decide whether to try to increase the property’s value.

This can be a good idea if an older adult owns the property and it is particularly outdated. In other words, if it is just like a ‘fixer upper’ house.

Some don’t want to do this because they want to sell their home quickly. Others want to avoid it as they find it mentally draining.

While awaiting the probate process, making it as presentable as possible makes sense.

Consider a second valuation

If you have redecorated or significant time has passed since the first valuation, you may wish to get another one.

This will give you a more accurate idea of what it should be sold for.

Find an estate agent

A good estate agent will be responsible for putting the property on the market and finding a buyer. You should compare the reviews and fees of estate agents before choosing one.

They can also help with staging the property and arranging viewings.

How much capital gains tax will I need to pay?

When inheriting a property, you don’t need to worry about inheritance tax but do need to consider capital gains tax.

Capital gains tax is required on the profit from any sale of a high-value asset. The rate is 28% for those who earn over £50,270 and 18% for those who earn below that figure.

This only applies when you sell a property that is not your home. If you decide to move into the property that you have inherited, then you can elect that as your main home.

You’d then pay capital gains tax if you sold the home you previously lived in.

Profit from capital gains is usually calculated as the difference between the amount paid for a property and the amount it is sold for.

Crucially, the value of inherited property is calculated from the home’s value at the time of probate.

For example, if the home is worth £250,000 at probate and you sold it for £250,000 three months later, no capital gains tax would be payable. You also have a capital gains tax-free allowance of £6,000.

If you sold the same property for £300,000, that would be a £50,000 profit. Let’s say you were in the lower tax bracket.

Here, you would pay an 18% tax on £44,000 (the profit minus the allowance), and therefore, you would be liable for £7,920. However, you’d also be able to deduct your legal fees.