How is an inherited rental property taxed?

Executors pay tax on rent during probate. A house left to you makes the rent yours from death once passed on. Profit over £2,500 or rent over £10,000 means a tax return: register by 5 October after the tax year.

Inheriting a let house or flat means two stages for tax: the executors' and then yours. The rules below follow GOV.UK and legislation.gov.uk, checked on 17 October 2026.

Who pays tax on what

GOV.UK calls the time from the date of death until everything has been passed on the "administration period". During it, the personal representatives may have to pay Income Tax on rental income from property. HMRC's Trusts, Settlements and Estates Manual says they pay it at the basic rate.

If the house was left to you by name in the will (a specific legacy), the same manual says you are entitled to the rent from the date of death. Once the executors pass it on, it is treated as your income for the tax years in which it arose, with credit for the tax they already paid. If you inherit a share of what is left of the estate instead, different rules apply, so ask the executors what income they passed to you and what tax they paid on it.

Once the property is yours

From the date the property passes to you, you are a landlord like any other. You pay tax on your rental profit: rent less allowable expenses such as letting agent fees, insurance and repairs. GOV.UK says that if your share of the rent before expenses is £1,000 or less a year, the property allowance covers it and you need not tell HMRC, unless you cannot use the allowance, for example because you claim the mortgage interest tax reduction. Over £1,000 and up to £2,500, contact HMRC. Profit over £2,500 or rent over £10,000 means a tax return: if you do not already send one, register by 5 October after the tax year. Registering late could lead to a penalty.

If you inherit jointly, for example with a brother or sister, you each pay tax on your own share of the profit.

For Making Tax Digital (MTD), your qualifying income is your share of rent before expenses, plus any self-employed turnover. GOV.UK says that if you receive income from property, you need to annualise it yourself. In our reading, if the rent only became yours partway through the year, you scale it up to a full year before comparing it with the threshold, as HMRC does for a sole trader in their first part-year. The MTD threshold page has the £30,000 and £20,000 lines.

Selling an inherited property

Your Capital Gains Tax base cost is not what the person who died paid. Under section 62 of the Taxation of Chargeable Gains Act 1992, the property is treated as acquired at its market value on the date of death, and a beneficiary takes over that value. Where a value has been ascertained for Inheritance Tax, section 274 says that value is used.

So the taxable gain is the growth since the date of death, less your selling costs and any improvements. For gains from 6 April 2026, the rates are 18% on any part within your unused basic rate band and 24% above it. The tax-free allowance is £3,000 per person. Tax on a UK home must be reported and paid within 60 days of completion. If you are UK resident and your total gains are under the allowance, GOV.UK says you do not need to report them online.

A worked example (2026-27)

Priya's father died on 12 November 2025, leaving her his rented terraced house. The value agreed for the estate was £220,000. The house stood empty while the estate was sorted out, so there was no rent in that time. The executors transferred it to Priya on 6 June 2026 and she let it from that day at £950 a month.

Her £8,200 profit is over £2,500 and she does not already file a return, so she registers for Self Assessment by 5 October 2027 and files by 31 January 2028. Her annualised £11,400 is under the £20,000 line that applies from 6 April 2028, so MTD does not apply yet.

Had she sold instead, completing on 26 February 2027 for £245,000 with £4,500 of selling costs, her gain would be £20,500, or £17,500 after the £3,000 allowance. As a higher-rate taxpayer she would pay 24%, which is £4,200, reported and paid by 27 April 2027.

What this means for you

Get three things from the executors: the date the property was transferred to you, the value used for the estate, and a note of any rent they collected and tax they paid.

Any tenancy carries on, and in our reading the landlord's duties, such as gas safety checks, electrical reports and deposit protection, become yours from the transfer. The landlord compliance checklist lists them.

Steps to take

1. Ask the executors for the transfer date, the value at the date of death and any rent and tax to pass on to you.
2. Tell the tenant and any letting agent where rent goes from that date.
3. Check the gas, electrical and deposit paperwork is in date and in your name.
4. Keep a record of rent, expenses and any mortgage interest from the transfer date.
5. If your profit tops £2,500 or your rent £10,000, register for Self Assessment by 5 October after that tax year.
6. Annualise your share of the rent and use the free MTD check to see if MTD applies.
7. If you sell, work out the gain from the date-of-death value and report and pay within 60 days of completion.

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