Capital Gains Tax on Inherited Property: What You Pay When You Sell

Inheriting a property can come with an unexpected tax question down the line — not when you inherit it, but when you sell it. Here’s how Capital Gains Tax on inherited property actually works.

Inheriting vs selling — two different taxes

This is the key thing to understand:

• Inheriting a property is dealt with under Inheritance Tax, paid by the estate — not by you, and not Capital Gains Tax.
• Selling it later can trigger Capital Gains Tax on any increase in value since the date of death.

So you don’t pay CGT to receive the property — only potentially when you dispose of it.

How the gain is worked out

The crucial point: for CGT, your “cost” isn’t what the deceased originally paid — it’s the property’s value at the date of death (the probate value). This effectively resets the clock.

Your gain is:

• Sale price, minus
• the probate value, minus
• selling costs and any capital improvements you made

Then you deduct the £3,000 annual exempt amount, and pay 18% / 24% for 2025/26 depending on your income. Our Capital Gains Tax calculator helps you estimate it.

Because the cost is the date-of-death value, the taxable gain is often smaller than people fear — it’s only the rise since you inherited, not the property’s whole history.

If you live in it

If you make the inherited property your main home, Private Residence Relief can exempt the gain for the time you live there (plus the final 9 months). If it was never your home — rented out or left empty — the full gain since death is potentially taxable.

The 60-day deadline

For UK residential property, you must report and pay within 60 days of completion via HMRC’s online property service. This applies to inherited property too, and it’s a common trap — 60 days passes quickly around a sale, so work out the figure and set aside the cash in advance.

Ways to reduce the bill

• Use your £3,000 allowance (and a co-owner’s, if jointly inherited)
• Deduct all selling costs and improvements
• Claim Private Residence Relief if you’ve lived there
• Where several people inherit, each has their own allowance — which can meaningfully cut the total
• Mind the timing across tax years

Get advice before you sell

Inherited-property CGT involves the probate value, the 60-day deadline, potential reliefs and multiple owners’ allowances — and getting it right (or wrong) can be worth thousands. Our Capital Gains Tax service handles the calculation and the 60-day return, and our tax planning service helps co-owners structure the sale efficiently. For the basics, see Capital Gains Tax explained.