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You must report and pay within 60 days of completion - no CGT is due when you inherit property, only if you later sell for more than its probate value. CGT rates are 18% or 24% depending on your income, with a £3,000 annual allowance. Private Residence Relief can eliminate CGT if you lived in the property as your main home.
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If you've inherited property in the UK, you might be wondering about Capital Gains Tax. Good news: you don't pay CGT when you inherit—only if you later sell the property for more than its probate value. This guide explains everything you need to know about CGT on inherited property, including rates, reliefs, and how to minimize your tax bill.
No, you do not pay CGT when you inherit property. You only pay Capital Gains Tax if you sell the property for MORE than its value at the date of death (known as the probate value).
When you inherit property, you automatically receive it at its probate value. This becomes your "base cost" for CGT purposes. If you sell at or below this value, there's no CGT to pay. You only pay tax on any increase in value between the probate value and your eventual sale price.
The probate value (also called the "market value at date of death") is crucial for CGT calculations. This is the property's market value on the date the person died, established by:
This probate value becomes your "base cost" for CGT—it's as if you purchased the property at this price. Any gain the deceased made from their original purchase to death is "wiped out"—you don't pay tax on it.
You can reduce your taxable gain by deducting certain costs associated with selling the property:
Allowable costs:
NOT allowable:
The rate of CGT you pay on property depends on your total taxable income for the tax year:
| Your Income Tax Band | CGT Rate on Property |
|---|---|
| Basic rate (income up to £50,270) | 18% |
| Higher rate (income £50,271 and above) | 24% |
Important: Your income AND your capital gain are added together to determine which rate you pay. If this pushes you into the higher rate band, you'll pay 18% on the portion within the basic rate, and 24% on the portion in the higher rate.
Every UK taxpayer gets an annual Capital Gains Tax allowance (also called the "annual exempt amount"). For the 2026/27 tax year, this is:
This means the first £3,000 of your total capital gains in a tax year (6 April to 5 April) is tax-free. Note that this allowance was reduced from £6,000 in 2023/24.
For married couples or civil partners: Both partners get their own £3,000 allowance (£6,000 combined). You can transfer the property to your spouse before selling to take advantage of both allowances—this is completely tax-free between spouses.
Private Residence Relief (PRR) is the most effective way to reduce or completely eliminate CGT on an inherited property. If the property was your only or main residence throughout your ownership, you pay NO CGT at all.
You qualify for full Private Residence Relief if:
If you only lived in the property for part of the time you owned it, you get proportional relief:
Lettings Relief, which previously gave up to £40,000 additional relief if you rented out part of your home, was abolished in April 2020. It's no longer available for property sales after this date.
Critical deadline: You must report and pay CGT within 60 days of completing the property sale.
This is a strict deadline. The 60 days start from:
Use the UK Property Reporting Service:
You'll also need to include the gain in your Self Assessment tax return for the same tax year (even if you've already paid through the Property Reporting Service).
Moving into the inherited property as your main residence is the most powerful way to reduce CGT:
Married couples and civil partners can transfer property between themselves with no CGT:
If you made losses on other assets (shares, other property) in the same tax year, you can offset these against your property gain.
Don't miss deductible expenses:
If you inherit property jointly with siblings or other beneficiaries:
Inherited property outside the UK has different rules:
If property is in a trust:
Keep the following records for at least 6 years after the tax year you sold the property:
Consider hiring a tax advisor or accountant if:
If you sell within a month or two of death at around the probate value, there's unlikely to be any gain, so no CGT. However, if the property has increased in value even in this short time, CGT may be due on the gain.
No. HMRC treats this as if you sold at full market value, and you'll pay CGT on the difference between probate value and market value (not what you actually received).
If the property has decreased in value since death, you may have a capital loss. You can use this loss to offset other capital gains in the same tax year or carry the loss forward to future years.
These are separate taxes. Inheritance Tax is paid by the estate (if it exceeds the £325,000 threshold plus Residence Nil Rate Band). CGT is paid by YOU if you later sell the property for more than probate value. However, you don't usually pay both on the same gain.
No. Private Residence Relief only counts for the period AFTER you inherited the property (after the date of death). Living there before doesn't count towards the relief.
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