CGT on Inherited Property

Q: What is my base cost for an inherited property?

Your base cost is the probate value — the market value of the property at the date of death. This figure is typically established by a professional valuation for the purpose of the inheritance tax return (IHT400).

Key facts

There is no CGT on death — assets pass to the estate at market value (a CGT-free uplift).
Your acquisition cost for CGT is the probate value (market value at the date of death).
CGT arises only if the property is sold for more than the probate value (after deducting allowable costs).
If the property was the deceased’s main home and you sell within the administration period, PRR may apply.
The gain must be reported via the 60-day CGT property return for UK residential property.

No CGT on Death

One of the most important rules in UK tax is that there is no CGT charge when someone dies. Assets pass to the deceased’s personal representatives (executors or administrators) at market value on the date of death, but no tax is charged on the uplift.^[2]

This means any unrealised gain that accumulated during the deceased’s lifetime is effectively wiped clean. The personal representatives (and ultimately the beneficiaries) start with a “new” base cost equal to the market value at death — often referred to as the probate value.

Inheritance Tax vs CGT: While there is no CGT on death, the estate may be liable to Inheritance Tax (IHT) if its value exceeds the nil-rate band (£325,000, or £500,000 with the residence nil-rate band). IHT and CGT are separate taxes — one applies on death, the other on subsequent disposal.

Your Base Cost: The Probate Value

When you inherit a property, your CGT base cost is the market value at the date of death (the probate value). This is established during the estate administration process, typically through a professional valuation.^[3]

Getting the valuation right is critical — a value that is:

Too low: reduces IHT but increases the future CGT bill if the property is sold for more
Too high: increases IHT but provides a higher base cost to reduce future CGT

Calculating the Gain on Sale

If you sell an inherited property for more than the probate value, CGT is due on the gain:^[1]

Step	Detail
Disposal proceeds	Sale price
Less: probate value	Market value at date of death
Less: costs since inheritance	Improvements, solicitor fees (purchase and sale), estate agent fees
= Gain or loss
Less: Annual Exempt Amount	£3,000 (2025/26)
= Taxable gain	At 18% / 24%

Worked Example

Claire inherits a property valued at £300,000 (probate value) in March 2023. She sells it in October 2025 for £340,000, paying £5,000 in estate agent fees and £1,500 in solicitor fees. She is a higher-rate taxpayer.

Step	Amount
Sale proceeds	£340,000
Less: probate value	−£300,000
Less: estate agent fees	−£5,000
Less: solicitor fees	−£1,500
Gain	£33,500
Less: AEA	−£3,000
Taxable gain	£30,500
CGT at 24%	£7,320

Sales by Personal Representatives

If the personal representatives sell the property during the administration period (before it is distributed to beneficiaries), they are liable for CGT on any gain above the probate value:^[2]

Personal representatives pay CGT at 24% (the higher rate — no basic-rate band)
They receive the full individual AEA (£3,000) for the tax year of death and the two following tax years
After the two-year period, no AEA is available to personal representatives

Private Residence Relief on Inherited Property

PRR may be available in certain circumstances:^[4]

If the deceased occupied the property as their main home until death, and the personal representatives sell it during administration, PRR may cover the gain in full
If a beneficiary inherits the property and moves in as their main home, they can claim PRR for the period they live there
If the beneficiary never lives in the property, PRR is not available

Tip: If you inherit a property and are considering selling, selling quickly while the value is close to the probate value can minimise CGT. The longer you hold it, the greater the potential gain above the probate base cost.

Capital Losses on Inherited Property

If the property has fallen in value since the date of death and you sell it for less than the probate value, you have an allowable capital loss. This can be:

Offset against other capital gains in the same tax year
Carried forward to offset future capital gains
Reported to HMRC within four years of the end of the tax year

Frequently Asked Questions

Do I pay CGT when I inherit a property?

No. There is no CGT on inheriting a property. Assets pass to the estate at market value on the date of death, with no CGT charge. CGT only arises if you later sell the property for more than the probate value.

What is my base cost for an inherited property?

Your base cost is the probate value — the market value of the property at the date of death. This figure is typically established by a professional valuation for the purpose of the inheritance tax return (IHT400).

What if the property has fallen in value since the death?

If you sell for less than the probate value, you make an allowable capital loss. This loss can be offset against other capital gains in the same tax year or carried forward to future years.

Can I claim Private Residence Relief on an inherited property?

If you move into the inherited property and make it your main home, you can claim PRR for the period you live there. If you sell it without ever living in it, PRR is not available. Special rules may apply during the estate administration period.

Sources

Tax when you sell property — GOV.UK
Capital Gains Manual: CG30300 – Death and personal representatives — HMRC
Valuing the estate of someone who has died — GOV.UK
Capital Gains Manual: CG65200 – PRR: personal representatives — HMRC