Capital gains tax on inherited property in the UK: how it works
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Capital gains tax on inherited property in the UK is charged only on the increase in value after the death, because there is no Capital Gains Tax charge when someone dies and the property is treated as acquired at its market value on the date of death [1][2]. If you sell an inherited rental property for more than that value, the gain above your allowance is taxed. If you sell for the same or less, there's normally no Capital Gains Tax.
Your starting figure is the value used for Inheritance Tax (the probate value) [3]. Take that, plus buying and selling costs and any improvements, off the sale price [3]. Individuals get a £3,000 tax-free allowance, and pay 18% on gains within the basic-rate band and 24% above it, for gains from 6 April 2026 [4]. Report and pay within 60 days of completion on a UK residential property [5]. If the executor sells before the property is passed to you, the estate pays instead, with its own allowance for the tax year of death and the next two [1].
This is general information, not tax advice.
Why your base cost is the value at death
HMRC's helpsheet HS282 explains it: "There is no CGT charge when someone dies." The assets are treated as passing to the personal representatives "at their market value on that date", and when they reach you they are "treated as though they were passed to the legatees on the date of death, at their market value on that date" [1]. The rule is in section 62 of the Taxation of Chargeable Gains Act 1992 [2].
So if your grandmother bought a house for £40,000 in 1985 and it was worth £300,000 when she died, your base cost is £300,000. The £260,000 of growth during her lifetime is never subject to Capital Gains Tax.
GOV.UK says to use market value when "you inherited it (and do not know the Inheritance Tax value)" [3]. Where there is an Inheritance Tax value, use that.
Capital gains tax on inherited property UK: the rates and allowance
| Item | Individual | Estate (personal representatives) |
|---|---|---|
| Tax-free allowance | £3,000 [4] | Available for the tax year of death and the 2 following years [1] |
| Rate within basic-rate band | 18% for gains from 6 April 2026 [4] | Ask HMRC; estates have their own rules |
| Rate above basic-rate band | 24% for gains from 6 April 2026 [4] | |
| Reporting deadline for UK residential property | 60 days from completion [5] | 60 days; HMRC tells the PR how to pay [1] |
For a basic-rate taxpayer, work out taxable income, add the taxable gain after the allowance, and anything that falls within the basic-rate band is at 18%, the rest at 24% [4].
Who pays: the estate or you?
This is the most important choice when you inherit a property you plan to sell.
If the executor sells during the administration. The estate pays Capital Gains Tax on the increase since death. The estate gets the allowance in the tax year of death and the following two years [1]. GOV.UK says personal representatives "do not pay Capital Gains Tax from the estate if you transfer assets directly to a beneficiary" [6].
If the property is transferred to you and you sell. You pay, using your own allowance and rates, with the value at death as your base cost [1].
Where several beneficiaries share a house, a transfer to them first means each has their own allowance against their share. Whether that's better depends on everyone's income and the timing. Ask the executor's accountant to run both.
Worked example 1: selling soon after probate
Tom inherits a let flat valued at £220,000 at the date of death. He sells 11 months later for £232,000, paying £4,000 in agent and legal fees. He's a higher-rate taxpayer, and the sale completes after 6 April 2026.
| Line | Amount |
|---|---|
| Sale price | £232,000 |
| Less value at death | minus £220,000 |
| Less selling costs | minus £4,000 |
| Gain | £8,000 |
| Less annual allowance | minus £3,000 |
| Taxable gain | £5,000 |
| Tax at 24% | £1,200 [4] |
He must report and pay within 60 days of completion through a Capital Gains Tax on UK property account [5].
Worked example 2: keeping it as a rental, then selling
Aisha inherits a house worth £180,000 at death. She lets it for five years, spends £15,000 on a rear extension, and sells for £240,000 with £5,000 of selling costs. She's a basic-rate taxpayer with £20,000 of taxable income in the year of sale.
| Line | Amount |
|---|---|
| Sale price | £240,000 |
| Less value at death | minus £180,000 |
| Less extension (improvement) | minus £15,000 |
| Less selling costs | minus £5,000 |
| Gain | £40,000 |
| Less annual allowance | minus £3,000 |
| Taxable gain | £37,000 |
Part of the £37,000 will fall within her remaining basic-rate band at 18% and the rest at 24% [4]. Normal maintenance like decorating can't be deducted from the gain; improvement works like an extension can [3]. Keep receipts; Gaffy's document vault is a good place for them.
Inherited a property and now own two homes?
If you inherited a property you might move into, HMRC says that if inheriting means you own 2 properties you must tell HMRC which is your main home within 2 years [7]. If you don't, HMRC decides when you sell [7]. Private Residence Relief can reduce the gain on a home you lived in [3]. A property you only let out doesn't get this relief.
Reporting: the 60-day rule
You must report and pay any Capital Gains Tax on UK residential property within 60 days of completing the sale [5]. You need [5]:
- the property address and postcode,
- the date you got the property (the date of death for inherited property [1]),
- the exchange and completion dates,
- the value when you got it and when you sold,
- buying, selling and improvement costs,
- any reliefs you're claiming.
If you're already in Self Assessment, you include the sale in your tax return too [5]. A UK resident whose total gains are under the allowance doesn't need to report online [5].
If you're a personal representative, you report through your own account but can't pay through it; HMRC tells you how to pay [5][1].
Selling at a loss
If the property sells for less than its value at death, you have a capital loss, which you can report [3]. If the estate sells within three years for less than the probate value, the estate can also claim to reduce the Inheritance Tax value to the sale price [8].
Common mistakes
| Mistake | Fix |
|---|---|
| Using the original purchase price as base cost | Use the value at death [1] |
| Missing the 60-day deadline | Diary it from completion, not exchange [5] |
| Deducting repairs and decorating | Only improvements count against the gain [3] |
| Forgetting the estate already paid tax on a sale | Executor's sales are the estate's, not yours [6] |
| Not telling HMRC your main home within 2 years | Nominate if you inherit a second home [7] |
Inherited jointly? Each owner works out their own gain
If you and your siblings inherit a house together, each of you is treated as owning your share from the date of death at its share of the market value then [1]. GOV.UK says that if you own property jointly with other people, you "work out the gain for the share that you own" [3], and each owner must report their own gain or loss [5]. In practice that means:
- each owner uses their own £3,000 allowance against their share,
- each owner's rate depends on their own taxable income,
- each owner has their own 60-day deadline from the same completion date.
So three siblings selling a house with a £12,000 gain after costs each have a £4,000 gain, and after their allowances each has £1,000 taxable. That's very different from one person owning the whole thing.
Records to keep from day one
Keep these together, because you may not sell for years:
| Record | Why |
|---|---|
| The probate valuation report | Your base cost [1][3] |
| IHT400 or the estate's value report, if any | Confirms the Inheritance Tax value [3] |
| Invoices for improvements (extensions, new rooms) | Deductible from the gain [3] |
| Solicitor and agent bills for the sale | Deductible from the gain [3] |
| Completion statement | Starts the 60-day clock [5] |
People also ask
Do I pay capital gains tax on inherited property in the UK?
Only when you sell, and only on any rise above its value at the date of death [1][7].
What is the base cost of an inherited property?
Its market value at the date of death, usually the probate value [1][3].
What is the capital gains tax rate on inherited property?
For individuals, 18% within the basic-rate band and 24% above it, for gains from 6 April 2026 [4].
How long do I have to pay capital gains tax on an inherited property?
60 days from completion for UK residential property [5].
How can I avoid capital gains tax on inherited property in the UK?
Selling soon after death for close to the probate value often means little or no gain. The estate's allowance, your own allowance, improvement costs and selling costs all reduce the taxable gain [1][3][4].
FAQ
Does Capital Gains Tax apply if the executor transfers the house to me?
No. Transferring an asset directly to a beneficiary isn't a sale by the estate [6].
Can I use the calculator on GOV.UK?
Not if you're a personal representative or trustee, or if you have other gains or reliefs besides Private Residence or Letting Relief [3].
Do I pay Stamp Duty when I inherit?
No. You don't pay Stamp Duty when you inherit a property [7].
Does Gaffy calculate Capital Gains Tax?
No. Gaffy stores the receipts and records you'll need.
Try Gaffy free for a month · Inherited property hub · Probate valuation of property · Inherited property: sell or rent · Inheritance Tax on rental property
Sources
- HMRC, HS282 Death, personal representatives and legatees (2026): https://www.gov.uk/government/publications/death-personal-representatives-and-legatees-hs282-self-assessment-helpsheet/hs282-death-personal-representatives-and-legatees-2026
- Taxation of Chargeable Gains Act 1992, section 62: https://www.legislation.gov.uk/ukpga/1992/12/section/62
- GOV.UK, Tax when you sell property: work out your gain: https://www.gov.uk/tax-sell-property/work-out-your-gain
- GOV.UK, Capital Gains Tax: rates and allowances: https://www.gov.uk/capital-gains-tax/rates
- GOV.UK, Report and pay your Capital Gains Tax: if you sold a property in the UK: https://www.gov.uk/report-and-pay-your-capital-gains-tax/if-you-sold-a-property-in-the-uk-on-or-after-6-april-2020
- GOV.UK, Dealing with the estate: managing and selling assets: https://www.gov.uk/probate-estate/managing-and-selling-assets
- GOV.UK, Tax on property, money and shares you inherit: property: https://www.gov.uk/tax-property-money-shares-you-inherit/property
- Inheritance Tax Act 1984, section 191: https://www.legislation.gov.uk/ukpga/1984/51/section/191