Capital Gains Tax on Inherited Property UK (2026): What Beneficiaries Need to Know
Updated 14 May 2026 · 8 min read · England & Wales
Inheriting a property does not trigger capital gains tax — but selling it later can. In England and Wales, the tax is calculated on the gain between the probate value (the market value at the date of death) and the eventual sale price. Understanding how this works can save beneficiaries thousands of pounds.
The CGT-free uplift on death
When someone dies, their property is valued at market value at the date of death for inheritance tax purposes — this is the probate value. The same value becomes the CGT base cost for any beneficiary who inherits the property. Any gain the deceased made during their lifetime is effectively wiped out: it is never charged to CGT.
This “free uplift” is one of the most valuable features of the UK tax system for property owners. It means that someone who bought a house in 1990 for £60,000 and held it until death when it was worth £500,000 creates no CGT liability — either for their estate or for the beneficiary who inherits at £500,000.
When CGT does arise on inherited property
CGT arises when a beneficiary sells the inherited property (or otherwise disposes of it — gifts, transfers into trust, etc.) for more than the probate value. The chargeable gain is:
Chargeable gain = Sale proceeds − Probate value − Allowable costs
Allowable costs include: estate agent fees, legal costs of the sale, and any capital improvement costs incurred after the date of death (repairs and maintenance are not allowable — only genuine improvements that enhance the property’s value).
CGT rates on inherited residential property (2026)
| Taxpayer’s income band | CGT rate (residential) | CGT rate (other assets) |
|---|---|---|
| Basic rate (income + gain ≤ £50,270) | 18% | 10% |
| Higher / additional rate | 24% | 20% |
Rates are current from April 2024. The annual CGT exempt amount is £3,000 (2026/27). The gain is added to your taxable income to determine the applicable rate band.
Worked example
Sarah inherits her mother’s property. Probate value: £320,000.
Sarah sells 2 years later for £370,000. Legal and agent costs: £8,000.
Chargeable gain: £370,000 − £320,000 − £8,000 = £42,000
Less annual exempt amount: £42,000 − £3,000 = £39,000 taxable gain
Sarah is a higher-rate taxpayer: CGT = £39,000 × 24% = £9,360 due within 60 days
The 60-day CGT reporting rule
Since 27 October 2021, any CGT on the sale of UK residential property must be reported and paid within 60 days of completion using HMRC’s online ‘Report and pay CGT on UK property’ service. This deadline applies even if you file a self-assessment tax return (the annual January deadline does not replace it).
You also include the disposal in your self-assessment return, but failure to meet the 60-day deadline triggers automatic late-filing penalties starting at £100, with further penalties at 6 and 12 months. If no CGT is due (gain within the exempt amount, or full private residence relief applies), no 60-day report is required.
Private residence relief (PPR) on inherited property
If you move into the inherited property and use it as your only or main home, private residence relief applies for the entire period you live there, plus the final 9 months of ownership automatically. If you occupy the property throughout your entire period of ownership, 100% PPR means no CGT at all on the eventual sale.
You cannot claim PPR on a property you have rented out without living in it (letting relief was abolished for most cases in April 2020). If you already own a main home elsewhere, consider making a main residence election within 2 years of acquiring the inherited property to designate which property benefits from PPR.
Key planning points for beneficiaries
- Sell promptly if values are flat — the longer you hold, the higher the potential gain and CGT bill
- Move in if practical — PPR eliminates CGT for the occupation period and the final 9 months
- Split with a lower-rate spouse — a no-gain no-loss transfer to a basic-rate spouse shifts future CGT to the 18% band
- Keep improvement records — costs of genuine post-death improvements reduce the chargeable gain
- Use your annual exempt amount — sell in the tax year before you have other large gains if timing allows
- Report within 60 days — late reporting triggers penalties; set a diary reminder for the completion date
Frequently asked questions
Do you pay capital gains tax when you inherit property in the UK?
No — inheriting property is not itself a CGT event. CGT is not charged when property passes to a beneficiary on death. The estate may be subject to inheritance tax (IHT), but that is a separate tax on the estate, not on the beneficiary. The beneficiary 'inherits' the property at its probate value (market value at the date of death), which becomes their base cost for future CGT purposes. CGT only arises if the beneficiary later sells (or otherwise disposes of) the property for more than that probate value.
What is the CGT base cost on inherited property?
The CGT base cost on inherited property is the market value of the property at the date of the deceased's death — the 'probate value'. This is also the value used for IHT purposes and is typically confirmed by an RICS-qualified surveyor's valuation submitted to HMRC with the IHT account. The effect is a 'free uplift': any gain accrued during the deceased's lifetime is wiped out for CGT purposes. If the property has fallen in value since the date of death, you can register an allowable loss (the difference between probate value and sale price) to set against other CGT gains.
What CGT rates apply when selling inherited residential property in the UK?
For residential property in England and Wales, the CGT rates (from April 2024 onwards) are: 18% for gains falling within the basic rate income tax band; 24% for gains falling within the higher or additional rate band. Your taxable income for the year of disposal determines which band applies. The gain is added to your income, and CGT is charged at 18% up to the top of the basic rate band and 24% above it. CGT rates on non-residential property (e.g. inherited land) and most other assets are 10% (basic rate) and 20% (higher rate). The annual exempt amount (£3,000 in 2026/27) reduces the chargeable gain before rates are applied.
Do you have to report inherited property CGT to HMRC within 60 days?
Yes — since 27 October 2021, any CGT arising on the disposal of UK residential property must be reported to HMRC and any CGT due paid within 60 days of completion. This applies even if you normally file a self-assessment tax return. You report via HMRC's 'Report and pay CGT on UK property' online service. If you file a self-assessment return, you also include the disposal in your annual return — but you must still report and pay within 60 days; the 31 January self-assessment deadline does not replace it. Penalties apply for late reporting. If no CGT is due (e.g. the gain is within the annual exempt amount, or you qualify for full private residence relief), no 60-day report is required.
Can private residence relief reduce CGT on an inherited property?
Yes — if you move into the inherited property and use it as your only or main home, private residence relief (PPR) applies for the period of occupation plus an automatic final 9 months. If you live in the property throughout the period of ownership (from probate value date to sale), you qualify for 100% PPR and no CGT is due. If you live in it for only part of the ownership period, the relief is apportioned on a time basis. You cannot benefit from PPR on a property you have let out without living in it (letting relief was substantially abolished in April 2020). If you already have another main residence, you may need to make a main residence election to nominate which property qualifies for PPR.
What if the inherited property is held jointly with other beneficiaries?
Each co-owner's gain is calculated separately based on their proportion of the property. For example, if three siblings inherit a property equally and sell it, each calculates CGT on one-third of the gain. Each beneficiary applies their own annual exempt amount and their own income tax position to determine the applicable rate. If one sibling has a higher income and another is a basic rate taxpayer, they may pay different rates on their identical fractional gains. Co-owners who disagree about whether or when to sell can apply to the court for an order for sale under s14 Trusts of Land and Appointment of Trustees Act 1996.
Can you transfer inherited property to a spouse with no CGT?
Yes — transfers between spouses or civil partners living together are made on a 'no gain, no loss' basis for CGT purposes. If you transfer an inherited property to your spouse, no CGT arises at the time of the transfer. Your spouse takes over your base cost (the probate value at the original date of death). When they later sell, CGT is calculated based on that original probate value — so the no-gain no-loss treatment defers the tax, it does not eliminate it. Note: if only one of you qualifies for PPR on the property, the PPR entitlement does not transfer — each spouse is assessed on their own occupation period.
What happens if the inherited property has fallen in value since death?
If you sell an inherited property for less than the probate value (i.e. for a loss), you make an allowable CGT loss — the difference between the probate value and the sale proceeds. This loss can be offset against capital gains you make in the same tax year, or carried forward indefinitely to set against future gains. You report the loss to HMRC within 4 years of the end of the tax year in which the sale occurred (or on a self-assessment return). If there is also an IHT post-death valuation claim (for instance, HMRC accepted a lower probate value), the CGT base cost adjusts accordingly.
Make sure your estate plan is up to date
Understanding the tax position of inherited assets starts with a clearly drafted will. WillSafe’s will kit helps you specify who receives what — minimising uncertainty and administration costs for your beneficiaries.
Get the Will Kit →Related guides
- Inheritance tax on property in the UK
- Selling a house during probate
- How to reduce your inheritance tax bill
- Estate administration in England and Wales
- Deed of variation — redirecting an inherited estate