Inheriting from a loved one can be an emotional and often life-changing event. While the focus is usually on family and legacy, the less sentimental side—tax—shouldn’t be ignored. Many people assume that once something is left to them, that’s the end of the story. Unfortunately, HMRC often has a chapter or two to add.
The UK doesn’t shy away from taxing inheritance. In fact, with inheritance tax potentially as high as 40%, it's one of the more aggressive systems in the world.
So what happens when you inherit property, money, or shares? Are you taxed straight away? Is there property tax involved? And what smart steps can you take to legally reduce your liabilities?
Let’s break it down, plain and simple.
First things first: Inheritance Tax (IHT) is not paid by the person receiving the inheritance—it's paid out of the deceased’s estate before the assets are distributed.
Here’s what you need to know:
Pro Tip: If the total estate (including property, cash, and investments) is under the combined nil-rate thresholds, there may be no inheritance tax at all.
Let’s say you inherit a house or flat—does that mean a property tax bill is coming?
The good news:
You don’t pay Stamp Duty or Capital Gains Tax (CGT) when the property is passed to you through inheritance.
The not-so-good news:
Example: If you inherit a home worth £500,000 and later sell it for £550,000, you may owe CGT on the £50,000 gain—unless you lived in the home as your primary residence, in which case Private Residence Relief may apply.
Receiving money from an inheritance sounds straightforward, but there are some things to keep in mind.
Be mindful: Once inherited money is in your account, it’s yours—and anything you do with it going forward (saving, investing, gifting) can have future tax implications.
Inheriting shares or investment portfolios? Here’s how it typically works in the UK:
Important: HMRC uses the value on the date of death as your “acquisition cost.” This becomes crucial when calculating gains or losses if/when you sell.
Also:
Dealing with inheritance in the UK can feel like navigating a minefield of rules and exceptions—but with the right knowledge (and a good accountant), it doesn’t have to be overwhelming.
Whether you’re inheriting property, money, or shares, the key is understanding
If you're handling an estate or expecting an inheritance and want clarity on your tax position, speaking with a qualified accountant is one of the smartest moves you can make.
Want Help Navigating Inheritance Tax?
We help individuals across the UK reduce stress—and tax bills—when managing estates and inheritances. If you have recently inherited property or are planning for the future, get in touch with us today for a free, no-pressure consultation.