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No CGT is due when you inherit a property. Tax only becomes a question if you sell it later, and then only on the growth between the probate value and your sale price. For example, a house with a probate value of £250,000 sold for £280,000 with £5,000 of selling costs gives a gain of £25,000. Take off the £3,000 annual exemption and £22,000 is taxable at 18% or 24%, depending on your income. Any tax due must be reported and paid within 60 days of completion.
If you have inherited a house or flat, it is natural to worry that a tax bill is waiting for you. The reassuring answer is that inheriting the property itself does not trigger Capital Gains Tax. This guide explains when CGT does apply, how to work out what you might owe, and the 60-day reporting deadline that catches many people out. The figures below are for the 2026/27 tax year and come from HMRC's guidance at gov.uk/capital-gains-tax. Everyone's circumstances are different, so if anything here is close to the line for you, check with HMRC or an accountant before you rely on it.
Not when you inherit it. There is no CGT on receiving a property from someone who has died. CGT only arises if you later sell the property, or otherwise dispose of it, for more than its value at the date of death.
When you inherit, you are treated as acquiring the property at its market value on the date the person died. This is usually called the probate value, and it becomes your base cost. If you sell at or below that value, there is no gain and no CGT. You are only ever taxed on growth that happens after the death.
That also means any gain the person who died made during their lifetime is not your problem. If your mother bought her house for £80,000 and it was worth £250,000 when she died, your starting point is £250,000, not £80,000.
Because the probate value is your base cost, getting it right matters twice over. It feeds into any Inheritance Tax calculation for the estate, and it fixes the starting point for your own CGT if you sell later. Our guide to valuing property for probate explains how to establish and evidence this figure properly.
Be honest with the valuation, in both directions. A low probate value can reduce Inheritance Tax, but it also lowers your CGT base cost, so more of the eventual sale price counts as taxable gain. A high probate value does the opposite. HMRC checks valuations from both angles, so the only safe approach is a genuine market value at the date of death, with evidence to back it up.
The calculation itself is straightforward:
You can deduct from the gain:
You cannot deduct normal maintenance or redecorating, such as repainting or fixing a leak. The dividing line between an improvement and a repair is not always obvious, so keep every receipt and check with HMRC or an accountant if you are unsure which side a cost falls on.
| Where the gain falls | CGT rate on residential property |
|---|---|
| Within your unused basic-rate band | 18% |
| Above your basic-rate band | 24% |
Your taxable income and the gain are looked at together. If part of the gain fits within your unused basic-rate band it is taxed at 18%, and anything above that at 24%. The current income tax bands are on gov.uk.
Where two or more of you inherit the property together, each owner is taxed on their own share of the gain. Each of you has your own £3,000 annual exempt amount and your own rate bands. Two siblings splitting the £25,000 gain in the example above would each have a £12,500 share, each deduct their own £3,000, and each pay tax at their own rate on £9,500.
If CGT is due on a UK residential property sale, you must report the disposal and pay the tax within 60 days of completion.
The clock starts on the completion date, not the day you exchanged contracts and not the day the money reaches your account. You report and pay through HMRC's online Capital Gains Tax on UK property service. Missing the deadline leads to penalties and interest, so put the date in your diary as soon as completion is set. If no tax is due, for example because the gain is within your £3,000 exemption, a 60-day report is generally not needed, but check your own position on gov.uk or with an accountant.
Honestly: there is no loophole that makes CGT on a genuine gain disappear. But there are legitimate ways to reduce it, and for many people they bring the bill down to nothing.
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If the property became your only or main home after you inherited it, private residence relief may reduce the gain for the period you lived there. This is the relief that means most people pay no CGT on their own home. The rules around partial occupation are detailed, so check with HMRC or an accountant before relying on it.
CGT is only charged on growth after the date of death. If you sell reasonably soon, at or near the probate value, there is little or no gain to tax. Waiting years in a rising market is what creates large bills.
Each owner has their own £3,000 annual exempt amount and their own rate bands, so a jointly inherited property spreads the gain across more allowances. Transfers between spouses and civil partners can also affect how the gain falls, but take advice before rearranging ownership purely for tax.
Estate agent fees, conveyancing, and capital improvements you made after inheriting all come off the gain. Keep the receipts.
What you should not do is undervalue the sale, invent costs, or simply not report the gain. HMRC receives property sale data from the Land Registry, and the penalties for deliberate errors are far worse than the tax.
Sometimes the personal representatives (the executors or administrators) sell the property during the administration, rather than transferring it to the beneficiaries first. In that case the estate, not you, is the seller for CGT purposes.
Whether it works out better for the estate to sell, or for the property to pass to the beneficiaries who then sell, depends on how many beneficiaries there are, their tax positions, and the size of the gain. It is a genuine planning point, not a formality, so it is worth asking an accountant or the solicitor handling the estate before contracts are signed. If you are also handling the sale itself, our guide to selling an inherited house walks through the whole process step by step.
If the market has fallen and the property sells for less than the probate value, there is no CGT, because there is no gain. If the sale happens within 4 years of the death, the estate may also be able to claim Inheritance Tax loss relief, which substitutes the sale price for the probate value in the IHT calculation and can produce a refund of overpaid IHT. The claim has conditions attached, so take professional advice before assuming it applies.
Usually not. If you sell soon after the death at or around the probate value, there is little or no gain, so little or no CGT. Tax only arises on growth between the date of death and the sale.
They are separate taxes doing separate jobs. Inheritance Tax is worked out on the estate's value at the date of death. CGT applies only to growth after that date. You are not taxed twice on the same slice of value.
£3,000 per person. Where a property is inherited jointly, each owner has their own £3,000 exemption to set against their share of the gain.
Yes. Even where the estate paid no Inheritance Tax, the probate value is still your CGT base cost when you sell. A properly evidenced valuation at the date of death can save you real money and real arguments with HMRC later. See our guide to valuing property for probate.
HMRC charges penalties for late reporting and interest on late payment. If you have already missed it, report and pay as soon as you can, because the cost grows with time. Details are on gov.uk.
Yes, in either direction. HMRC can query a valuation it thinks was too low (which understates IHT) or too high (which understates CGT). Keep the evidence behind your valuation, and if a query arrives, respond with the facts rather than guesses. An accountant or the estate's solicitor can help.
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Where they normally lived, even if they died somewhere else.
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