Key takeaways
- There is no Capital Gains Tax on death: the person who died is not taxed on gains up to the date of death.
- Beneficiaries inherit assets at their probate value, so only growth after death is taxed when they sell.
- If executors sell during administration, they pay CGT at 24% after a £3,000 allowance for the year of death and the next two years.
- Selling inherited UK residential property with a gain means a 60-day report and payment.
- A deed of variation within two years of death can redirect an inheritance for CGT as well as Inheritance Tax.
Inheriting a house, shares or other assets does not by itself create a Capital Gains Tax (CGT) bill. Death wipes out any gain built up during the deceased’s lifetime, and Inheritance Tax deals with the value of the estate instead. CGT only becomes relevant when the assets are sold, and only on growth since the date of death.
No CGT on death
When someone dies, there is no CGT on the assets they owned, however much they had risen in value. This is sometimes called the “tax-free uplift” on death. The estate may pay Inheritance Tax instead.
Your base cost: the probate value
If you inherit an asset, your acquisition cost for CGT is its market value at the date of death, usually the value agreed for probate and Inheritance Tax purposes. When you later sell, the gain is:
Sale price − probate value − allowable costs (selling costs, and any improvements you make)
Example
Megan’s mother died in March 2025, leaving her a house valued at £340,000 for probate. Megan sells it in October 2026 for £365,000, with £6,000 of estate agent and legal fees. She never lived in it.
| Step | Amount |
|---|---|
| Sale price | £365,000 |
| Less probate value | (£340,000) |
| Less selling costs | (£6,000) |
| Gain | £19,000 |
| Less annual exempt amount | (£3,000) |
| Taxable gain | £16,000 |
At 24% (if Megan is a higher rate taxpayer), CGT is £3,840, reported and paid within 60 days of completion.
Getting the probate value right
A realistic valuation at death matters for both taxes. A low valuation reduces Inheritance Tax but increases the later CGT, and HMRC can challenge values on either side. Where an Inheritance Tax return was required, the value “ascertained” for Inheritance Tax is binding for CGT.
Selling during estate administration
If the personal representatives (executors) sell assets before passing them to beneficiaries:
- the gain is calculated from the probate value
- they pay CGT at 24%
- they get the annual exempt amount of £3,000 for the tax year of death and the next two tax years
- they can deduct a share of the costs of obtaining probate, using HMRC’s published scale or actual costs
If the asset is instead transferred to a beneficiary who then sells, the beneficiary uses their own allowance and rate, which may be 18% if they have unused basic rate band. Comparing the two routes can save tax, especially when several beneficiaries share an asset and each has an annual exempt amount.
Selling for less than probate value creates a loss. Personal representatives can use a loss against their own gains. If an estate sells land within four years of death (or quoted shares within one year) for less than probate value, it may be able to substitute the lower value for Inheritance Tax, reducing that tax.
Inherited homes and private residence relief
- If you move into an inherited property and make it your main home, private residence relief covers the period you live there, plus the final 9 months of ownership.
- If you let it out, the let period is chargeable.
- Executors can claim private residence relief on a sale during administration if the home was occupied as their main residence by beneficiaries entitled to at least 75% of the proceeds.
Deeds of variation
Beneficiaries can redirect all or part of an inheritance, for example to their own children, with a deed of variation made within two years of the death. If the deed includes a statement for CGT purposes, the redirected asset is treated as passing directly from the deceased, with no CGT on the beneficiary who gave it up. Without that statement, the variation is a gift by the beneficiary, which can trigger CGT.
Inherited shares and funds
Shares and fund units are also acquired at their value on the date of death, usually based on the quoted price. For accumulation funds, reinvested income after death adds to the base cost. See CGT on shares.
Frequently asked questions
Do I pay Capital Gains Tax on an inherited house?
Only on any increase in value after the date of death, when you sell it. The gain up to death is not taxed.
What is the base cost of inherited property for CGT?
Its market value at the date of death, normally the probate value.
Who pays CGT if the executors sell the house?
The personal representatives pay it from the estate, at 24% after the annual exempt amount, on any gain since death.
Can I avoid CGT on inherited property by living in it?
Living in it as your main home makes that period exempt, along with the final 9 months, but any period it was let or empty is usually chargeable.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance in October 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.