Capital gains tax on inherited property in the UK

Do you pay capital gains tax when you inherit a house?

No. Inheriting a property is not a taxable event for capital gains tax (GOV.UK). When someone dies, their assets pass at market value on the date of death, and any gain that built up during their lifetime is wiped clean. If the deceased bought a house in 1998 for £90,000 and it was worth £360,000 when they died, that £270,000 of lifetime growth is never charged to you.

What you inherit is the property at its probate value. That value becomes your base cost, the figure everything is measured from if you sell later. Tax advisers call this the uplift on death. The same uplift applies to other assets in the estate, though savings wrappers have extra rules of their own, covered in what happens to an ISA when someone dies.

How does the probate value uplift work?

The probate value, the property's market value on the date of death, replaces the price the deceased originally paid as your starting point for capital gains tax. The original purchase price is irrelevant to your calculation. Only the movement from probate value to sale price counts.

The probate value does two jobs. It is the figure inheritance tax is assessed on, and it is your base cost for capital gains tax. Those two taxes pull in opposite directions. A low valuation reduces any inheritance tax the estate pays, but it raises the capital gains tax bill if you sell for more later. A realistic, well-evidenced valuation protects you on both sides, which is why a professional valuation at the date of death is worth having. Our guide on how to value an estate for probate explains how the figure is set and agreed with HMRC.

Sell soon after death for roughly the probate value and there is usually little or no gain, so no tax. Hold the property for a few years while the market rises, then sell, and the gain between the probate value and the sale price can be taxable.

What are the capital gains tax rates on inherited property for 2026/27?

For 2026/27, capital gains tax on inherited residential property is 18% on any part of the gain within your basic-rate income band and 24% on any part above it (GOV.UK). These rates replaced the old 28% higher rate from October 2024. Your income and your gain are added together to work out which rate applies, so a large gain can push part of itself into the higher band even if your salary sits below it.

• Individual, gain within basic-rate band: 18%

• Individual, gain above basic-rate band: 24%

• Personal representatives selling for the estate: 24%, with no basic-rate band

Everyone gets an annual exempt amount. As of the 2026/27 tax year, the annual exempt amount is £3,000, so the first £3,000 of your total gains in the tax year is free of tax. The allowance cannot be carried forward, so any unused amount is lost at the end of the tax year.

• 2022/23: £12,300

• 2023/24: £6,000

• 2024/25 onwards, including 2026/27: £3,000

How is CGT on property inherited calculated?

CGT on property inherited is calculated as the sale price minus the probate value, minus allowable costs, minus your £3,000 annual exempt amount, with the balance taxed at 18% or 24%. A worked example shows how the pieces fit.

Say you inherit a house valued at £300,000 for probate. Eighteen months later you sell it for £330,000. Your gain is £30,000. Take off £5,000 of estate agent and legal fees and the £3,000 annual exempt amount, and the taxable gain is £22,000. If your income already uses up your basic-rate band, the tax is £22,000 at 24%, which is £5,280. If part of the gain falls within your remaining basic-rate band, that part is taxed at 18% instead, and the bill is lower. The figures move with your income for the year, which is why timing a sale can matter.

What can you deduct from the gain?

You can deduct the selling costs, the cost of capital improvements made after inheriting, and the cost of the probate valuation. You are taxed on the gain, not the full sale price.

Allowable deductions include the estate agent and legal fees on the sale, capital improvements you made after inheriting (an extension or a new roof, for example, but not repairs or redecoration), and the cost of the probate valuation where it is incurred to establish the base cost.

You cannot deduct inheritance tax already paid on the property, the general administration costs of the estate, or funeral costs. Those belong in the estate accounts, not your capital gains calculation.

How do you report and pay capital gains tax on a property sale?

You must report and pay capital gains tax on a UK residential property sale within 60 days of completion, through an HMRC Capital Gains Tax on UK property account. This account is separate from Self Assessment. The 60-day clock starts on the completion date, not the exchange date, and your conveyancer will not do it for you.

Missing the 60-day deadline triggers an automatic £100 penalty, with more added the longer the delay runs. You also need to report where your total proceeds for the year are above £50,000, even if the gain is covered by your allowance and no tax is due.

Can you avoid capital gains tax on inherited property?

You can reduce or remove capital gains tax on inherited property by living in it as your main home, selling close to the probate value, or sharing ownership before a sale. A few rules are worth planning around.

Private residence relief applies if you move into the inherited property and make it your genuine main home. Relief covers the period you actually live there, plus the final nine months of ownership. If you never live in it, private residence relief is not available, and the whole gain is exposed. Selling without ever living there means the full growth since the date of death is taxable, after costs and your allowance.

Transfers between spouses or civil partners are made on a no gain, no loss basis. Moving a share to a husband, wife or civil partner before sale lets a couple use two annual exempt amounts and two sets of tax bands, which can reduce the total. The recipient takes on the same probate value as their base cost.

Where several people inherit a property together, each owner's share of the gain is assessed separately against their own £3,000 allowance and their own income band. Two siblings each get an allowance, and sometimes selling across two tax years suits the family as a whole.

If you sell for less than the probate value, you make an allowable loss. You can set that loss against other capital gains in the same year or carry it forward.

What if the estate sells the property before you inherit?

If the executor sells the property during the administration, the estate has its own capital gains position, and the beneficiaries are not the sellers. Personal representatives pay capital gains tax at 24% on residential property, with no basic-rate band available to them. Selling estate property is one of the core duties covered in what does an executor of a will do.

Personal representatives get the £3,000 annual exempt amount for the tax year of death and the two tax years after it. After that, the estate has no allowance. Where property values are rising, it can be worth transferring the property to the beneficiaries first, so each of them can use their own allowance and band.

Do you pay both inheritance tax and capital gains tax?

You can pay both, but on different events: inheritance tax is charged on the estate at death, and capital gains tax is charged on you only if you later sell at a gain. Paying one does not reduce the other. They are calculated independently.

Inheritance tax is paid by the estate, before you receive anything, if the estate is above the inheritance tax threshold of £325,000, or the higher figure where the residence nil rate band lifts it toward £500,000. Capital gains tax is paid by you, later, only if you sell the property for more than its probate value.

Before any of this, the property has to be found and cleared

You cannot value, transfer or sell a property until you have the authority to deal with the estate and a clear picture of what it holds. That means a grant of probate, covered in our guide on how to apply for probate, or letters of administration where there is no will, and it means knowing every account, mortgage and charge attached to the property and the person. Understanding what happens to a joint mortgage when one partner dies matters here, because a jointly held loan behaves differently from a sole one, and a forgotten charge can hold up a sale.

Pulling that picture together usually means contacting many providers, repeating the same details in call after call. Legacy Trail finds the accounts and services the person held and notifies them centrally, so the tax and sale decisions sit on top of a complete picture rather than a guess. Start here: