Buy-to-let property portfolios and inheritance tax
Buy-to-let and inheritance tax: does your portfolio count?
For many landlords, a property portfolio is decades of hard work. But when you die, your rental properties count towards your estate for inheritance tax, and the bill can be bigger than expected.
Several properties can easily take an estate well above the tax-free allowances.
The allowances that apply
- Basic allowance – the first £325,000 is tax-free.
- Home allowance – up to £175,000 more, but only for a home you have lived in, left to children or grandchildren.
- Unused allowances can pass to a husband, wife or civil partner.
- Anything above the allowances is usually taxed at 40%.
See our inheritance tax guide.
"My portfolio is a business. Doesn't it qualify for Business Relief?"
It is one of the most common questions landlords ask. The short answer is usually not, even if you use a company.
Why letting is usually excluded
Business Relief does not cover businesses that mainly hold land, buildings or investments, and letting property counts as holding an investment.
What changed in April 2026?
From 6 April 2026, full business and farm relief is capped at £2.5 million, with half relief above that. This only affects assets that already qualify. It does not bring a typical buy-to-let portfolio into relief. See our business relief guide.
How much inheritance tax could a landlord pay?
Mortgages are taken off the value of the properties, so tax is worked out on the net value. A mortgaged portfolio can still leave a large bill.
Anne is widowed and leaves everything to her two children. Her late husband left everything to her, so she has his unused allowances as well as her own.
| Anne's estate | Value |
|---|---|
| Her home | £350,000 |
| Four rental properties | £1,200,000 |
| Less mortgages | −£400,000 |
| Savings | £100,000 |
| Total estate | £1,250,000 |
| Less two basic allowances | −£650,000 |
| Less two home allowances | −£350,000 |
| Taxable estate | £250,000 |
| Inheritance tax at 40% | £100,000 |
Anne has only £100,000 in cash, which also has to cover debts and funeral costs. If she had been single, the bill would have been £300,000. Anne is an illustrative example, so work out your own figures with our inheritance tax calculator.
Paying the tax: could your family be forced to sell?
When most of an estate is property, finding the cash to pay the tax is one of the biggest problems executors face.
Paying over 10 years
Tax on property, including rental property, can be paid in yearly instalments over 10 years, but interest is charged. The interest-free option only applies to business and farm assets, so it rarely helps landlords.
Selling property
If there is little cash, your executors may have to sell quickly, with tenants in place, which may not get the best price. See our guide to what an executor does.
Planning what happens to your portfolio
There is no single answer for every landlord. The key is to decide what you want to happen, and make sure your will can deliver it.
What do you want to happen?
- Your children keep the properties and carry on letting them.
- Particular properties go to particular people.
- The portfolio is sold and the money shared out.
- The properties are held in a trust for your family.
Giving properties away now
- Seven-year rule. A gift can escape inheritance tax if you live seven years. See our gifting guide.
- Capital gains tax. Giving a property to anyone but your spouse or a charity can trigger capital gains tax, currently 18% or 24%.
- Keeping the rent. If you give a property away but keep the rent, it usually still counts as yours.
How PJH Estate Planning can help
PJH Estate Planning can review your will and plans for your property portfolio, explain the inheritance tax position and help you decide what should happen to each property. Find out what you could face in your current situation with our free Estate Health Check: 10 quick questions that show any gaps in your plans. You can visit our offices, or we can visit you at home.
Sources
- GOV.UK: What qualifies for Business Relief
- GOV.UK: Paying inheritance tax in yearly instalments
- GOV.UK: Capital Gains Tax on gifts
General information as at October 2026. Not legal, financial or tax advice.