Capital Gains Tax During Estate Administration UK (2026): When PRs Pay CGT and How It Interacts with IHT

Personal representatives (PRs) — executors and administrators — are liable to CGT when they sell or otherwise dispose of estate assets during the administration period. Here is the framework: (1) THE PR'S BASE COST — THE PROBATE VALUE: when a person dies, TCGA 1992 s.62(1) provides that all the deceased's assets are deemed to be disposed of and immediately reacquired at their market value at the date of death. This 'uplift on death' means: (a) the deceased's lifetime gains are wiped out — no CGT arises on the deemed disposal; (b) the PRs inherit the assets at their market value at the date of death (the probate value). The probate value is the PRs' base cost for any future CGT calculation; (2) CGT ON SALES DURING ADMINISTRATION: if the PR sells an estate asset during administration (to raise cash to pay debts, IHT, or expenses; or to realise value for beneficiaries), CGT may arise on the GAIN from the probate value to the sale price. Example: shares valued at £50,000 at death (probate value). PR sells 12 months later for £65,000. CGT gain = £15,000. Subject to the annual exempt amount and CGT rates; (3) NO CGT ON RECEIPT OF THE ESTATE: the PR never pays CGT simply by receiving the estate assets — the assets are inherited at the probate value with no gain at that point. CGT only arises on subsequent disposals by the PR; (4) THE ADMINISTRATION PERIOD: the administration period runs from the date of death to the date the estate is fully administered and the final distribution is made. During this period the PRs are the relevant taxpayer. After that, each beneficiary is the relevant taxpayer for any further CGT on their share; (5) ASSETS INCREASING DURING ADMINISTRATION: if the estate takes a long time to administer (complex estates can take 2–3 years), assets may have increased in value significantly between the date of death and the date of sale. This creates a CGT gain even though the PRs never 'bought' the assets and the gain has arisen purely from the time taken to wind up the estate. Planning: sell assets early where possible; consider assenting assets to beneficiaries rather than selling (see below); (6) CGT REPORTING: PRs must report CGT gains through the estate's self-assessment return. For residential property sold by PRs during administration: a CGT return must be filed online within 60 days of completion (since 27 October 2021). Failure to file within 60 days triggers automatic penalties.

The annual exempt amount and CGT rates for estates differ from those of individual taxpayers: (1) ANNUAL EXEMPT AMOUNT FOR ESTATES: for the tax year of death and the following two tax years, the estate has its own annual CGT exempt amount. As of 2025/26: the estate annual exempt amount = £1,500. This was significantly reduced from earlier levels: 2022/23 = £12,300; 2023/24 = £6,000; 2024/25 = £1,500; 2025/26 = £1,500. So a PR administering an estate in 2025/26 can realise up to £1,500 of gains free of CGT in that tax year; (2) THE THREE-YEAR WINDOW: the estate annual exempt amount is available for the tax year of death and the next two tax years only. After those three tax years, the estate has NO annual exempt amount. This creates a time pressure: gains that could be sheltered by the exempt amount in the first 3 years will be fully taxable after that. For long administrations, this is a material consideration; (3) CGT RATES FOR PERSONAL REPRESENTATIVES: PRs pay CGT at the higher rates only — they do not benefit from the lower 10% or 18% rates available to basic-rate taxpaying individuals: residential property (not qualifying for PPR relief): 24% (from 6 April 2024; reduced from 28%); other assets (shares, investments, business assets): 20%; (4) COMPARISON WITH INDIVIDUAL BENEFICIARIES: if the PR assents an asset to a beneficiary rather than selling it, the beneficiary inherits at the probate value and their future CGT calculation benefits from their own personal annual exempt amount (£3,000 in 2025/26) and potentially the lower 10% or 18% rate if they are basic-rate taxpayers. This makes assenting assets to beneficiaries (rather than the PR selling) a common tax planning technique; (5) EXAMPLE: estate with £30,000 of share gains during administration (2025/26). PR annual exempt amount = £1,500. Taxable gain = £28,500. CGT at 20% = £5,700. If instead the PR assented the shares to the four residuary beneficiaries, each beneficiary inherits the shares at the probate value and can sell using their own annual exempt amount (4 × £3,000 = £12,000 combined) plus lower rates potentially. Tax saving by assenting rather than selling.

The tax treatment of asset appropriations by PRs — as opposed to sales — is a critical planning point: (1) APPROPRIATION — NOT A CGT DISPOSAL: when a PR transfers (assents or appropriates) an asset to a beneficiary in satisfaction of a specific legacy or as part of the residuary distribution, this is NOT a disposal for CGT purposes. TCGA 1992 s.62(4): an appropriation by a PR to a beneficiary in satisfaction of a legacy or residuary interest is not treated as a disposal for CGT. The PR has no CGT gain on the appropriation, regardless of how much the asset has increased in value since the probate date; (2) THE BENEFICIARY'S BASE COST AFTER APPROPRIATION: the beneficiary takes the asset at the same base cost as the PR — i.e. the probate value (the uplift on death value). Any future gain for the beneficiary is calculated from the probate value to the price at which the beneficiary eventually sells. The gain between the probate date and the appropriation date is, in effect, deferred (not crystallised) — it passes to the beneficiary who will be taxed when they sell; (3) PLANNING IMPLICATION: where assets have increased significantly in value between death and the time of distribution, it is usually more tax-efficient for the PR to ASSENT the assets to the beneficiaries rather than sell them, because: (a) the PR avoids a large CGT liability at 20%/24%; (b) the beneficiary can use their own annual exempt amount (£3,000) and potentially lower CGT rates (10% or 18% if they are a basic-rate taxpayer); (c) the beneficiary may choose to hold the assets long-term and defer the CGT indefinitely; (4) APPROPRIATION IN SATISFACTION OF A PECUNIARY LEGACY: where assets are appropriated to satisfy a pecuniary legacy (a cash gift), the PR appropriates the asset at its current value. If the current value exceeds the probate value, the question of whether a CGT disposal occurs is more complex — there is some uncertainty in HMRC practice. The safe approach is to take professional advice on appropriations in satisfaction of pecuniary legacies; (5) ASSENTING RESIDENTIAL PROPERTY: a PR assenting the family home to a beneficiary beneficiary is NOT a CGT disposal for the PR. The beneficiary inherits at probate value and their own PPR (principal private residence) relief applies if they move into the home. This makes assenting residential property to a beneficiary significantly more tax-efficient than the PR selling during administration.

IHT and CGT are separate taxes but they can apply to the same asset and create a 'double exposure': (1) THE DOUBLE EXPOSURE: IHT is charged on the probate value of the estate at death. If the PR then sells an asset during administration at a HIGHER price than the probate value, CGT is charged on the gain above the probate value. The same asset has therefore suffered: (a) IHT at 40% on its probate value (as part of the estate calculation); (b) CGT at 20%/24% on the additional gain between probate value and sale price. This is not 'double taxation on the same amount' — IHT is on the probate value and CGT is on the additional post-death gain. But it is cumulatively expensive; (2) PRACTICAL EXAMPLE: property worth £300,000 at death (probate value). IHT was charged on this value as part of the estate (assume 40% IHT on the excess over the NRB — the property contributes £300,000 to the taxable estate). During administration, the PR sells the property for £340,000. CGT gain = £40,000. PR CGT at 24% = £9,600 (residential property). Total tax = IHT on probate value + £9,600 CGT on the additional gain; (3) LOSS-ON-SALE RELIEF — WHERE THE ASSET FALLS IN VALUE: where the PR sells an asset at LESS than the probate value, IHT was over-charged on the estate. HMRC provides relief in two forms: (a) SHARES: if quoted shares are sold within 12 months of death at a loss relative to their probate value, the PR can make a claim under IHTA 1984 ss.179-189 to substitute the sale price for the probate value in the IHT calculation — obtaining a refund of IHT on the loss; (b) LAND: if land or property is sold within 4 years of death at a loss, the PR can claim under IHTA 1984 ss.191-198 for a refund of IHT. These reliefs can generate significant refunds where property markets fall between the date of death and the sale; (4) CGT LOSS DURING ADMINISTRATION: if the PR sells an asset at LESS than the probate value, a CGT loss arises. This loss can be set against other gains of the estate in the same or future tax years (within the administration period).

PRs have specific CGT reporting obligations that differ from individual taxpayers in some important respects: (1) RESIDENTIAL PROPERTY SALES — 60-DAY REPORT: from 27 October 2021, where a PR (or any individual) sells UK residential property that is not exempt from CGT, a CGT return must be filed online and any CGT paid within 60 days of completion of the sale. For PRs, this applies to sales of residential property during the administration of an estate. An estate that takes 2 years to administer with a house sale midway through must file and pay CGT within 60 days of the sale completing — not at the end of the administration. The 60-day CGT return is filed on the HMRC 'Report and pay CGT' online service. The PR must be registered as a 'personal representative' — not as an individual; (2) ANNUAL SELF-ASSESSMENT: if the estate has CGT gains (from any source — not just property), the PR must include them in the estate's annual self-assessment return for the relevant tax year. The SA return covers the full tax year; the 60-day return covers just the residential property disposal within 60 days. Both may be required where a property is sold during the administration year; (3) PENALTIES FOR LATE 60-DAY RETURN: failure to file the 60-day return on time: (a) up to 30 days late: automatic £100 penalty; (b) 30 days to 6 months late: daily penalty of £10/day (up to £900); (c) more than 6 months late: additional 5% of CGT due or £300 (whichever is higher); (d) more than 12 months late: further 5% or £300. Interest also runs on the unpaid CGT from the 60-day deadline; (4) OBTAINING A GOVERNMENT GATEWAY ACCOUNT: PRs must register for a HMRC Government Gateway account in the capacity of a 'personal representative' to file the 60-day return. This requires the reference number from the grant of probate. The process can take 1–2 weeks so PRs should register as soon as a property sale is anticipated, not after completion; (5) NO CGT RETURN REQUIRED WHERE NO GAINS: if the PR makes only losses during administration (all assets sold below probate value), no CGT is payable and no 60-day residential property return is required for the property sales (though reporting on SA is still good practice for transparency).