Tax
Do I Pay Capital Gains Tax on an Inherited Property?
You do not pay Capital Gains Tax (CGT) when you inherit a property — any Inheritance Tax is settled by the estate first. CGT can apply when you later sell an inherited property you did not live in, and it is charged only on the gain since the date of death (the probate value), not the whole increase since the deceased bought it. Your annual CGT allowance, selling costs and improvement spending reduce the taxable gain.
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- NoneCGT on inheriting
- Since deathCGT only on the later gain
- 60 daysto report & pay
- PRRcan remove it entirely
Inheriting versus selling
The moment of inheritance is not a CGT event — instead the property is valued for probate, and any Inheritance Tax due is the estate’s responsibility. That probate value becomes your "base cost". If you later sell for more than that figure, the difference is your capital gain, and CGT may be due on it. So a property inherited and sold quickly at roughly the probate value often produces little or no gain, while one held for years as prices rise can. This is an important distinction many people miss: the tax is on the increase after you inherited, not the lifetime increase.
How the gain is calculated
Your taxable gain is worked out as follows:
- Sale price
- minus the probate value (your base cost)
- minus allowable selling costs (estate agent and legal fees)
- minus the cost of capital improvements (not routine repairs)
- minus your annual CGT exempt amount
What remains is taxed at the residential-property CGT rates, which depend on whether you are a basic or higher-rate taxpayer. Because allowances and rates change, confirm the current figures on GOV.UK or with an accountant before you sell.
The 60-day reporting rule
For UK residential property, you must report and pay any CGT to HMRC within 60 days of completion using a Capital Gains Tax on UK property account. This is a strict deadline with penalties for missing it, and it is separate from your normal Self Assessment tax return. Plan for it before you sell: work out the likely gain, set the money aside, and have the figures ready so you are not caught out by the short window.
Reliefs that reduce or remove the bill
| Relief / allowance | How it helps |
|---|---|
| Private Residence Relief | Exempts the period you live in it as your only/main home — can remove CGT entirely |
| Annual CGT exempt amount | A slice of gain each year is tax-free |
| Spouse/civil partner transfer | Transfer a share to use both annual allowances |
| Allowable costs & improvements | Selling fees and capital works reduce the gain |
If you move into the inherited property and make it your main home, Private Residence Relief can exempt that period and often eliminate the charge.
Selling an inherited property in practice
Most people sell rather than keep an inherited home, and the CGT position is usually modest if you sell near the probate value. Remember you generally need the grant of probate before you can complete, and if several people inherit, you will need to agree the sale (see selling with multiple beneficiaries). If the property is empty, deteriorating or hard to maintain, a fast cash sale can complete in weeks, and selling close to the probate value keeps any CGT small. For higher-value estates, take advice — the figures can be significant.
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Written & reviewed by Lisa Hayes, Founder
Lisa Hayes is the founder of Ready Steady Sell and an independent UK home-selling expert with over a decade helping homeowners weigh cash house buyers, property investors and the wider fast house-sale industry — without pressure or hidden fees. Every guide is reviewed for accuracy under our editorial standards.
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Frequently asked questions
Straight answers, no sales talk
Do I pay CGT when I inherit a house?
No. You do not pay Capital Gains Tax on inheriting. Any Inheritance Tax is dealt with by the estate. CGT only becomes relevant if you later sell at a gain.
How is CGT on an inherited property worked out?
On the gain since the date of death — the sale price minus the probate value, minus selling costs and capital improvements, then minus your annual CGT allowance.
How can I avoid CGT on an inherited property?
Living in it as your main home brings in Private Residence Relief, and selling close to the probate value keeps the gain small. Spouses can transfer a share to use both allowances.
When do I have to pay CGT after selling?
For UK residential property, you must report and pay any CGT to HMRC within 60 days of completion, using a CGT on UK property account — separate from Self Assessment.
Is Inheritance Tax the same as Capital Gains Tax?
No. Inheritance Tax is paid by the estate on the value at death; Capital Gains Tax may be paid by you on any increase in value between inheriting and selling.
Do I need probate to sell an inherited house?
Yes — completion requires the grant of probate, which gives the executor authority to sell. You can market and agree a sale beforehand, but not complete.