Capital Gains Tax on Inherited Property Calculator
Calculate your potential CGT liability when selling an inherited property in the UK
Calculate Your Capital Gains Tax
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What this means for you:
How Capital Gains Tax on Inherited Property Works
When you inherit property in the UK, you don’t pay Capital Gains Tax at the time of inheritance. However, if you later sell that property for more than its probate value, you may need to pay CGT on the gain.
Key Point
Inheriting a property does not trigger CGT. The tax only becomes due when you sell the property and make a gain above the probate value.
Probate Value: Your Starting Point
The probate value is the market value of the property at the date of death. This becomes your baseline for calculating any future gains. If the property was valued at £300,000 during probate and you sell it for £350,000, you’ve made a gain of £50,000 (before deductions).
Allowable Deductions
You can reduce your taxable gain by deducting certain costs:
- Acquisition costs: Legal fees, surveyor costs, and other expenses incurred when inheriting the property
- Improvement costs: Expenses for major improvements that enhanced the property’s value, such as extensions, new kitchens, or structural work (but not routine maintenance)
- Selling costs: Estate agent fees, solicitor fees, and other costs directly related to the sale
Keep all receipts and documentation for these expenses, as HMRC may request evidence when you report your gain.
Current CGT Rates and Allowances
For the 2025/26 tax year, the annual CGT allowance is £3,000 per person. This means you can make gains up to this amount tax-free each year. If you own the property jointly with others, each person can use their own allowance.
CGT rates for residential property are:
- 18% for basic rate taxpayers (those with total taxable income up to £50,270)
- 24% for higher and additional rate taxpayers (those with total taxable income above £50,270)
Tax Band Consideration
Your CGT rate depends on your total taxable income for the year, including the capital gain. If your income plus the gain pushes you into a higher tax band, you may pay CGT at both rates on different portions of the gain.
Private Residence Relief
If you move into the inherited property and make it your main home, you may qualify for Private Residence Relief when you sell. This can reduce or completely eliminate your CGT liability for the period you lived there as your main residence.
Multiple Beneficiaries
When property is inherited by multiple beneficiaries, it’s advisable to formally appropriate the property from the estate to each beneficiary. Each person then owns a defined share and is responsible for calculating and paying CGT on their portion of any gain when the property is sold.
Reporting and Payment Deadlines
Since 27 October 2021, you must report and pay CGT on residential property sales within 60 days of completion. This is done through the HMRC CGT on UK property service. Missing this deadline can result in penalties and interest charges.
Frequently Asked Questions
No. You only pay CGT on the gain, which is the difference between the sale price and the probate value, minus allowable deductions. If you inherited a property worth £300,000 and sold it for £350,000, your gain is £50,000, not £350,000.
If you sell for less than the probate value, you’ve made a capital loss, not a gain. You don’t pay CGT on losses. You can report the loss to HMRC and use it to offset other capital gains in the same tax year or future years.
If you move into the inherited property and make it your only or main home, you may qualify for Private Residence Relief. This can exempt the gain for the period you lived there. The relief is proportional to how long you lived there versus the total ownership period.
Improvements are enhancements that increase the property’s value, such as adding an extension, installing central heating, or a luxury kitchen renovation. Maintenance includes routine repairs, redecorating, and replacing items with similar standard equivalents. Only improvements are deductible.
Yes, they are separate taxes. Inheritance Tax may be due on the estate when someone dies, based on the total value. CGT is only due when you sell the inherited property and make a profit above the probate value. You might pay both, neither, or just one depending on circumstances.
Gifting property is treated as a disposal for CGT purposes. The gain is calculated based on the market value at the time of the gift minus the probate value. Gifts to your spouse or civil partner are exempt. Gifts to others may trigger CGT.
If you jointly own the property with your spouse or civil partner, you can each use your individual £3,000 annual allowance, giving you a combined £6,000 tax-free allowance. Each person calculates CGT on their share of the gain separately.
If the executor sells the property during probate and its value increased since the date of death, the estate pays CGT on the gain. This is relatively uncommon, as most properties are transferred to beneficiaries before being sold.