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What Do You Need To Do If You Inherit Property?

Although it is something that many people won’t end up experiencing, it is something that does happen on occasion – property is sometimes left to an individual in a will. It sounds like an ideal thing to happen; a new house without the hassle of actually going through the purchasing process. But what do you need to do once you have been declared the beneficiary of what looks like a very generous inheritance? And is it actually as great as it seems at first?
If you are given property, you have a choice. You can either keep it, or you can sell it. Depending on what you choose to do at this point dictates which rules you need to follow.

If you choose to sell the property, you may have to pay Capital Gains Tax. Capital Gains Tax is a tax paid on any profit made by selling something that has increased in value. This can be property, but it could be anything such as a business or lease. When it comes to an inherited property, if the value goes up after the date of death you will need to pay Capital Gains Tax on the difference between that value and the final sales price. In these cases, therefore, it is often best to sell the property sooner rather than later to minimise the amount of tax you will need to pay.
Keeping the property throws up some more questions. Will you live in it or rent it out, for example? If you choose the rental option, you will need to pay Income Tax on your rental earnings. Even if you don’t want to rent it out you may have to. If the property was the deceased’s second property, and they were already renting it out, their will may state that you need to do the same thing.
If you decide to live in the property yourself, and you have an additional property that you decide to keep, you will need to let your local tax office know, and tell them which is your primary principal residence. This needs to be done within two years of acquiring the second property. If you are unsure, think of which property you would sell first if you had to. The other property will be your primary one.
Something else to bear in mind is Inheritance Tax, which becomes payable on estates worth over £325,000.

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