No tax on the day you inherit, possibly tax on the day you sell
Inheriting a house, flat or buy-to-let does not create a capital gains tax bill. GOV.UK's guidance on inherited assets is clear that you do not usually owe tax on an inheritance itself; any inheritance tax due is normally paid by the estate before anything reaches you. Capital gains tax (CGT) only becomes a live question if you later dispose of the property, by selling it or giving it away, and even then the tax is charged only on the growth in value since the death, not on the whole sale price.
That single design feature, sometimes called the death uplift, is what this guide is really about. The property's value at the date of death becomes your starting cost for CGT, so the number the executors put on the probate paperwork echoes years into the future. Get it right and the CGT calculation is straightforward. Get it wrong, particularly by undervaluing to trim the inheritance tax bill, and you may simply have swapped one tax for another. Everything here is general information for England and Wales rather than legal or financial advice, and the figures are the current 2026/27 rates, verified against GOV.UK.
The probate value becomes your base cost
When someone dies, their assets are treated for CGT as passing at market value at the date of death. HMRC's Capital Gains Manual at CG30730 sets this out: everything passing to the personal representatives is deemed acquired by them at market value on the day of death, and beneficiaries who receive assets from the estate inherit that same base cost. What the deceased originally paid for the property is irrelevant. A house bought for £40,000 in 1988 and worth £350,000 at death starts its CGT life afresh at £350,000; the £310,000 of lifetime growth is never charged to CGT.
In practice, the market value at death is the probate valuation, the figure used when the estate was valued for inheritance tax. Two situations are worth separating:
- IHT was payable and HMRC agreed the value. Where the valuation was "ascertained" for inheritance tax, that figure is fixed as the CGT base cost. Nobody can later argue for a different number because it suits them.
- No IHT was payable. If the estate fell within the nil-rate band and allowances, HMRC never formally examined the property figure. The probate value is the starting point, but HMRC can challenge it when the eventual sale is reported, and so can you if you have evidence it was wrong.
This is one of several reasons a proper professional valuation at the time of death earns back its fee. Our guide to whether you need a RICS valuation for probate covers when an estate agent's appraisal is enough and when a formal Red Book valuation is the safer route.
The 2026/27 numbers: rates, allowance, deadline
Three figures drive the calculation, all confirmed on GOV.UK's CGT rates page for the 2026 to 2027 tax year:
- Annual exempt amount: £3,000 per person. This allowance has been cut hard in recent years (it was £12,300 as recently as 2022/23), so older articles quoting five-figure allowances are badly out of date.
- Rates on residential property gains: 18% and 24%. Gains falling within your unused basic rate income tax band are taxed at 18%; anything above it at 24%. Higher and additional rate taxpayers pay 24% on the whole gain.
- Personal representatives and trustees pay 24% if the estate or trust makes the disposal, with the estate having its own tax-free allowance for a limited window after death.
Then there is the deadline. A UK resident who sells a residential property at a gain must report and pay the CGT within 60 days of completion, using HMRC's online property account. This is separate from, and much faster than, the Self Assessment cycle. Miss it and interest and penalties follow. If the gain is fully covered by the annual exempt amount or a relief, no property return is needed, but anyone in Self Assessment still declares the disposal in their tax return.
Worked example: two siblings sell their mother's house
Nadia and her brother Chris inherit their mother's house in equal shares. The probate valuation at the date of death is £340,000. Fourteen months later, after clearing and redecorating, they sell for £395,000, paying £5,000 in estate agent and conveyancing fees. Neither has lived in the property.
| Step | Amount |
|---|---|
| Sale price | £395,000 |
| Less: probate value (base cost) | £340,000 |
| Less: selling costs | £5,000 |
| Total gain | £50,000 |
| Gain per sibling (50/50) | £25,000 |
| Less: annual exempt amount each | £3,000 |
| Taxable gain each | £22,000 |
Chris is a higher rate taxpayer, so his £22,000 is all taxed at 24%: £5,280. Nadia earns less and has £12,000 of basic rate band unused, so she pays 18% on £12,000 (£2,160) and 24% on the remaining £10,000 (£2,400): £4,560. Between them, £9,840 of CGT, each reported and paid within 60 days of completion. Note that redecorating to sell is not deductible; only capital improvements that add value, such as an extension or a loft conversion, can be added to the base cost, alongside the buying and selling costs.
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The undervaluation trap: how a low probate figure inflates the CGT bill
Here is the connection many estates miss. Executors sometimes feel a pull towards a conservative, low probate valuation, either to keep the estate under the inheritance tax thresholds or simply to reduce the IHT bill. But the probate value and the CGT base cost are the same number wearing two hats. Every pound shaved off the date-of-death value is a pound added to the taxable gain on sale.
Rerun the example above with the house lowballed at £310,000 instead of £340,000. The total gain jumps from £50,000 to £80,000, and each sibling's taxable gain rises by £15,000. At 24% that is up to £3,600 of extra CGT each. If the estate was below the IHT thresholds anyway, the low figure saved nothing at all and simply manufactured a future tax bill. Even where IHT is genuinely in play, the arithmetic needs care: IHT is charged at 40%, CGT at 18% or 24%, but a deliberately understated valuation is not a planning choice, it is an inaccurate return, and HMRC's District Valuer can and does challenge property figures, with penalties where the understatement was careless or deliberate. The honest market value, professionally evidenced, is both the legal requirement and usually the best outcome.
To see whether the estate you are dealing with is anywhere near an inheritance tax liability in the first place, run the figures through our IHT threshold calculator, and see our guide to the UK inheritance tax threshold for how the £325,000 nil-rate band and the residence nil-rate band stack up.
Reliefs that can shrink or remove the gain
Private Residence Relief. If you move into the inherited property and genuinely occupy it as your only or main home, the gain relating to your period of occupation is exempt, and GOV.UK's guidance on selling your home confirms the final 9 months of ownership always qualify once the property has been your main residence. Live there from inheritance to sale and there may be no CGT at all. The occupation must be real; a nominal few weeks with a mattress and a kettle will not survive scrutiny, and couples can only have one main residence between them.
Selling quickly. If the property is sold soon after death for close to the probate value, the gain may be small enough to sit within the annual exempt amounts of the beneficiaries, especially where several people inherit shares and each has £3,000 of allowance plus, potentially, some basic rate band at 18%.
Losses. If the property sells for less than the probate value, that is a capital loss, usable against other gains. Where the estate itself sells at a loss shortly after death, a related IHT relief can allow the lower sale price to be substituted for IHT purposes, a point for the executors to raise with their adviser before completion.
Who sells matters: executors or beneficiaries
Timing and structure change the bill. If the personal representatives sell during the administration, the estate pays CGT at 24% with a single allowance. If the property is first transferred (assented) to the beneficiaries, who then sell, each beneficiary uses their own £3,000 allowance and, for basic rate taxpayers, the 18% band. With three or four beneficiaries the difference can run to thousands of pounds on the same sale. The transfer itself triggers no CGT, because the beneficiaries simply take over the date-of-death base cost. Whether the property can be sold before or after the grant is a separate question, covered in our guide to whether you need probate to sell or transfer a property, and the wider tax context lives in our inheritance tax pillar guide.
If you are an executor weighing a sale, or a beneficiary trying to decide between selling now and moving in, the numbers above are only the framework: your income, the other beneficiaries' positions and the estate's IHT picture all feed in. A probate or estate planning specialist can model both routes before you commit to a sale, and the 60 day clock makes it far better to have that conversation before completion than after it.