CGT Uplift on Death UK (2026): TCGA 1992 s.62, Base Cost Reset, and Planning Opportunities

The capital gains tax 'free uplift' (also called the 'base cost reset' or 'CGT uplift') is one of the most valuable tax reliefs in English law. It operates under TCGA 1992 s.62 and works as follows: (1) THE DEEMED ACQUISITION RULE (TCGA 1992 s.62(1)): on the death of an individual, the personal representatives (PRs) are deemed to have ACQUIRED every asset in the deceased's estate at its MARKET VALUE at the date of death. This is the 'probate value'; (2) NO CGT ON DEATH (TCGA 1992 s.62(1)): the death itself does NOT constitute a disposal for CGT purposes — there is NO CGT charge on the deceased's lifetime gains. If the deceased bought shares for £10,000 that are worth £500,000 at death — the £490,000 gain is EXTINGUISHED; there is no CGT to pay on it, ever. The gain simply disappears; (3) BENEFICIARIES TAKE THE UPLIFTED BASE COST (TCGA 1992 s.62(4)): when the PRs ASSENT (transfer) assets to a beneficiary, the beneficiary acquires the asset at the SAME market value (probate value) that the PRs used — not at the deceased's original acquisition cost. So if the PRs hold shares with a probate value of £500,000 and transfer them to a beneficiary, the beneficiary's base cost is £500,000 — not £10,000; (4) PRACTICAL EFFECT: the beneficiary who later sells the asset only pays CGT on the GAIN SINCE DEATH — not on any gains the deceased made in their lifetime. This is the 'uplift' — the base cost has been 'uplifted' from the deceased's acquisition cost to the current market value; (5) THE MECHANISM — PROBATE VALUATION: the PRs must obtain valuations of all assets at the date of death. These valuations are declared on the IHT return (IHT400 or IHT205/IHT217 for small estates). The probate values become the base costs for the PRs and then for the beneficiaries; (6) ALL ASSET TYPES BENEFIT: shares; investment funds; investment property; business assets; art; jewellery; all receive the CGT uplift. The most common beneficiaries are: shares held outside an ISA; investment property (buy-to-let or holiday homes); unlisted business shares.

The CGT uplift applies to assets held in certain trust structures, but the rules differ depending on the trust type: (1) INTEREST IN POSSESSION (IIP) TRUST — UPLIFT ON LIFE TENANT'S DEATH (TCGA 1992 s.73): when the LIFE TENANT of an IIP trust dies, the trust assets DO receive the CGT uplift. The trustees are treated as disposing of and immediately reacquiring all trust assets at MARKET VALUE at the date of the life tenant's death. There is NO CGT charge on the trustees at that moment. The trust assets' base cost is reset to market value. The remaindermen (those who become absolutely entitled on the life tenant's death) then take the assets at the uplifted cost. This is a major tax advantage of an IIP trust in a will — the trust can hold assets with large embedded gains and the CGT is wiped out on the life tenant's death; (2) WHY THE IIP UPLIFT IS SO VALUABLE: example — a couple set up a will trust where the house passes into an IIP trust on first death for the surviving spouse (life tenant). The house was bought for £50,000 in 1985 and is worth £800,000. On the life tenant's death: (a) The trustees are deemed to dispose of and reacquire the house at £800,000 — no CGT; (b) The children (remaindermen) acquire the house at a base cost of £800,000; (c) If they sell immediately after the life tenant's death, there is likely no CGT (no gain since the uplift); (3) DISCRETIONARY TRUST — NO AUTOMATIC UPLIFT: a DISCRETIONARY trust does NOT benefit from the CGT uplift on any beneficiary's death. The trust assets DO NOT receive a free uplift when a beneficiary of a discretionary trust dies — because no beneficiary has a fixed entitlement to specific assets. The trustees' base cost remains at the original acquisition cost; (4) BARE TRUST: assets held on bare trust (nominee) are treated as belonging to the beneficiary — the beneficiary's death triggers the uplift on those assets as if the beneficiary owned them directly; (5) HMRC PRACTICE: the CGT uplift for trust assets (IIP — TCGA 1992 s.73) is automatic — the trustees need not make any election or claim. The uplift takes effect on the date of the life tenant's death.

The interaction between CGT uplift and IHT is nuanced — on the one hand, the CGT uplift is a powerful relief; on the other hand, assets with large uplifts are typically assets with large values, which attract IHT: (1) THE IHT/CGT INTERACTION: (a) IHT is charged on the GROSS ESTATE at date of death at 40% above the nil rate band; (b) The CGT uplift means the beneficiaries' base cost is stepped up to the full probate value (which was used to calculate IHT); (c) The beneficiaries pay IHT on the full value but take the asset with a base cost equal to that full value — so there is no double taxation of the same gain; (2) EXAMPLE OF THE INTERACTION: shares worth £1m at death (original cost £100k): (a) IHT: £1m included in estate; IHT at 40% on the amount above NRB/RNRB; (b) CGT: beneficiary takes base cost of £1m (the probate value); no CGT on the £900k lifetime gain; if the beneficiary later sells for £1.1m, CGT is only on £100k (gain since death); this is fair — the IHT already taxed the £1m value; (3) THE DOUBLE WHAMMY SITUATION (ASSETS BELOW NRB): where the deceased's estate is BELOW the nil rate band (no IHT), the CGT uplift is a PURE WINDFALL — neither IHT nor CGT is paid on the lifetime gain. This is a significant planning opportunity; (4) ASSETS THAT RECEIVE NO IHT RELIEF BUT DO GET THE CGT UPLIFT: (a) Buy-to-let property: subject to IHT at 40%; CGT uplift resets base cost — no CGT; (b) Shares: subject to IHT (unless BPR applies); CGT uplift resets base cost; (c) These are the 'double benefit' assets — IHT is paid but no CGT; the beneficiaries get a clean slate; (5) IMPORTANT NOTE — GIFTS WITH RESERVATION: if the deceased made a gift but RESERVED A BENEFIT (e.g. gave away a house but continued to live in it), the gifted asset is included in the IHT estate. The CGT treatment is complex: the original donee may already own the asset for CGT (at the date of the original gift); the IHT inclusion does not reverse the CGT position. Seek specialist advice on reservation of benefit assets.

The CGT uplift creates significant planning opportunities, both before and after death: (1) 'BED AND ESTATE' — REALISING LOSSES BEFORE DEATH: this is a planning technique used where an individual has ASSETS STANDING AT A LOSS (worth less than the acquisition cost). Since these assets will receive the CGT uplift on death — resetting their base cost to the lower current value — the losses are extinguished on death. The planning is: SELL the loss-making assets before death to CRYSTALLISE the CGT loss; use the loss to offset other gains; the cash proceeds pass through the estate (at the lower value). The name 'bed and estate' is a play on 'bed and breakfast' (selling and rebuying shares to crystallise gains) — instead of rebuying, the asset stays in the estate; (2) HOLDING ASSETS WITH GAINS UNTIL DEATH: conversely, assets standing at a GAIN (worth more than acquisition cost) should generally be HELD until death — the gain will be wiped out by the CGT uplift. Selling them during the deceased's lifetime triggers CGT at 18%/24% (or 10%/20% for business assets with BDR). Holding them until death means no CGT at all; (3) 'DEATH BED' PLANNING — TIMING OF ASSET SALES: where death is anticipated (serious illness), the most tax-efficient strategy is often to DELAY any disposals of gain-making assets until after death, so the uplift applies. The PRs can then sell the assets after death, crystallising the uplifted base cost with minimal CGT; (4) PRs' CGT ANNUAL EXEMPT AMOUNT: in the tax year of death and the following TWO tax years, the personal representatives have a CGT annual exempt amount of £1,500 (2025-26). This is the same as the trust AEA — not the full individual AEA (£3,000). However, since all assets are uplifted at death, the PRs' gains will normally be modest (only the gain since death); (5) 60-DAY REPORTING FOR UK RESIDENTIAL PROPERTY: where PRs sell UK residential property during the administration, any CGT gain must be reported to HMRC and the tax paid within 60 days of completion (UK Property Disposal return). This is a tight deadline that executors frequently miss; (6) INTERACTION WITH IPSFA 1975 CLAIMS: where an IPFDA 1975 claim is made against the estate after death and results in assets being transferred to a claimant by court order or by negotiated settlement, the CGT position depends on whether the transfer is treated as coming from the deceased's estate (and thus at probate value) or as a new disposal by the PRs.

The CGT uplift does not apply uniformly to all financial products — some are outside CGT entirely, and the uplift is irrelevant; others have special treatment: (1) ISAs — NO CGT IN LIFE, BUT NO UPLIFT ON DEATH EITHER: (a) During the ISA holder's lifetime, no CGT is payable on gains within the ISA (TCGA 1992 s.151A); (b) On death, the ISA LOSES ITS EXEMPT STATUS — the surviving spouse or civil partner can continue the ISA as a 'continuing bonds ISA' under the Additional Permitted Subscription (APS) allowance — they do not pay IHT on the ISA, but the assets pass into the estate for IHT; (c) The CGT uplift applies to the ISA assets — they receive an uplifted base cost — but since there was no CGT in the ISA anyway, the uplift is largely irrelevant for future CGT (the assets have already lost their tax shelter); (2) PENSIONS — OUTSIDE CGT AND OUTSIDE THE UPLIFT: pension funds are not 'chargeable assets' for CGT purposes — gains within a pension are not subject to CGT in the deceased's hands or on the pension trustees' hands. The death benefit (whether paid as a lump sum or used to purchase an annuity) is dealt with outside the estate. The CGT uplift does not apply to pension funds; (3) LIFE INSURANCE POLICIES (QUALIFYING POLICIES): gains on qualifying life insurance policies are subject to income tax (not CGT) during the policyholder's lifetime. On death, the policy pays out. The payout is not itself a CGT event — the proceeds fall into the estate for IHT. If the policy is WRITTEN IN TRUST, the proceeds pass outside the estate; (4) INVESTMENT BONDS (NON-QUALIFYING): investment bonds (single premium life insurance bonds) are income tax assets — gains are subject to income tax on a chargeable event (maturity; surrender; death; assignment). The CGT regime does not apply. No CGT uplift; (5) MAIN RESIDENCE — PPR: the deceased's main residence is usually exempt from CGT under Private Residence Relief (TCGA 1992 s.222) in any case — the CGT uplift on death is an additional protection for any period that was not covered by PPR. In practice, PPR and the death uplift together mean the family home rarely generates CGT for beneficiaries.