Capital gains tax on inherited property in the UK
You don't pay capital gains tax when you inherit a property. You may pay it if you later sell for more than the property was worth on the day the person died. That date-of-death figure, the probate value, becomes your starting point. Capital gains tax is charged only on the increase between the probate value and the sale price, after allowable costs and your tax-free allowance.
You don't pay capital gains tax when you inherit a property. You may pay it if you later sell for more than the property was worth on the day the person died. That date-of-death figure, the probate value, becomes your starting point. Capital gains tax is charged only on the increase between the probate value and the sale price, after allowable costs and your tax-free allowance.
Nothing is due when you inherit
The moment of inheritance is not a taxable event for capital gains tax. 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 they 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 people call this the uplift on death.
When capital gains tax does apply
Capital gains tax on an inherited property arises only when you sell, and only on the growth in value after the date of death. Sell soon after death for roughly the probate value and there's 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.
The price the deceased originally paid is irrelevant to your calculation. Only the movement from probate value to sale price counts.
Why the probate value matters so much
The probate value does two jobs. It's the figure inheritance tax is assessed on, and it's 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 to valuing an estate for probate explains how the figure is set and agreed with HMRC.
The rates and allowance for 2026/27
Inherited residential property that you sell is taxed at the residential property rates. For 2026/27 these are 18% on any part of the gain that falls within your basic-rate income band, and 24% on any part above it. 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. These rates replaced the old 28% higher rate from October 2024.
Everyone gets an annual exempt amount, and for 2026/27 it's £3,000. The first £3,000 of your total gains in the tax year is free of tax. That allowance has fallen sharply, from £12,300 in 2022/23 to £6,000 in 2023/24 and £3,000 since 2024/25. It can't be carried forward, so an unused allowance is simply lost at the end of the tax year.
Report and pay within 60 days
If you sell a UK residential property and capital gains tax is due, you have to report it and pay within 60 days of completion. You do this through an HMRC Capital Gains Tax on UK property account, which is separate from Self Assessment. The clock starts on the completion date, not the exchange date, and your conveyancer won't do it for you.
Miss the deadline and there's an automatic £100 penalty, with more added the longer it 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.
What you can deduct
You're taxed on the gain, not the full sale price, and several costs come off before the tax is worked out.
You can deduct the estate agent and legal fees on the sale, the cost of 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's incurred to establish the base cost. You can't 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.
A worked example
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 £3,000 of 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.
Reliefs and ways to reduce the bill
A few rules can cut the tax, and some 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, this relief isn't available, and the whole gain is exposed.
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 against other capital gains in the same year or carry it forward.
When the estate sells before you inherit
Sometimes the executor sells the property during the administration, before it's passed to beneficiaries. The estate then has its own capital gains position. Personal representatives pay at 24% on residential property, with no basic-rate band available to them, and they 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.
Inheritance tax and capital gains tax are separate
These are two different taxes on two different events. Inheritance tax is paid by the estate, before you receive anything, if the estate is above the nil-rate band 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 for more than the probate value. Paying one doesn't reduce the other. They're calculated independently.
Before any of this, the property has to be found and cleared
You can't 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 or letters of administration, and it means knowing every account, mortgage and charge attached to the property and the person. A joint mortgage behaves differently from a sole one, and a forgotten charge can hold up a sale. Legacy Trail finds the accounts the person held and notifies each provider centrally, so the tax and sale decisions sit on top of a complete picture rather than a guess. It's the same principle throughout estate administration: you can't close, value or sell what you can't see.
References and further reading
This article is for general information only and does not constitute legal or tax advice. Tax depends on your individual circumstances and can change. If you are dealing with an estate or a property sale, consider taking advice from a solicitor who specialises in probate or a qualified tax adviser. For other guidance specific to your circumstances, speak to a funeral director, Citizens Advice, or a regulated financial adviser.
This article is for general information only and does not constitute legal advice. Individual circumstances vary. If you are dealing with an estate, consider taking advice from a solicitor who specialises in probate. For other guidance specific to your circumstances, speak to a funeral director, Citizens Advice, or a regulated financial adviser.