Capital Gains Tax on an Inherited Property - Full Guide

If you’ve inherited a property and you’re thinking about selling it, Capital Gains Tax is usually the first worry that surfaces, often before the practical question of how to actually sell it.

You don’t pay any tax simply for inheriting a house. The question only arises when you come to sell it, and even then it depends on whether the property has gone up in value since the date of death, not on the value of the house itself. A lot of the anxiety around capital gains tax on an inherited property comes from not knowing which figure the tax is actually calculated against, so that’s the right place to start.

This guide covers how the gain is worked out, the rates and allowance that currently apply, when the bill has to be reported and paid, and the one relief that occasionally reduces it. For the separate question of inheritance tax on the estate itself, and the probate process you may still be going through, see the probate auction guide.

It’s worth being clear early on about what this guide is, and isn’t. It explains how the tax works and roughly what you might owe, so you can go into a sale with realistic expectations rather than vague anxiety. It isn’t a substitute for an accountant confirming your own exact figures, particularly where multiple beneficiaries, previous ownership changes, or periods of letting the property out are involved.

When Capital Gains Tax Applies to an Inherited Property

There’s no Capital Gains Tax charge on the act of inheriting a property, and none due at the point probate is granted. A gain only becomes chargeable if and when the property is later sold (or otherwise disposed of) for more than its value is treated as being on the date the person died.

In practice this means many inherited properties generate little or no gain at all, particularly if they’re sold reasonably soon after probate, before the market has moved much. The tax only bites on genuine growth in value between the date of death and the date of sale, not on the property’s value as a whole.

Your Base Cost Is the Probate Value, Not What the Deceased Paid

This is the single most useful fact in this whole guide, and the one that resolves the most common worry. Under the rule at TCGA 1992, section 62(1), a beneficiary is treated as having acquired the property at its probate value, the market value at the date of death, not at whatever the original owner originally paid for it decades earlier.

So if a parent bought a house in 1985 for £30,000 and it was worth £350,000 on the date they died, your base cost for Capital Gains Tax purposes is £350,000, not £30,000. Any gain you’re taxed on is only the increase from that probate value to your eventual sale price, which is usually a modest figure compared to the property’s full worth, especially for a sale completed within a year or two of the death.

Working Out the Gain, Step by Step

1. Start with the probate value. This is the figure that was used (or should have been used) for Inheritance Tax purposes when the estate was valued.
2. Deduct it from your sale price to get the raw gain. A property sold at auction for £380,000 with a probate value of £350,000 has a raw gain of £30,000.
3. Deduct allowable costs, which government guidance confirms includes solicitor and estate agent fees on the sale, and the cost of genuine capital improvements (an extension, for example). Normal maintenance and decorating don’t count.
4. Apply your annual tax-free allowance, if you haven’t used it against another gain in the same tax year.
5. Apply the correct rate to whatever’s left, covered next.

If several siblings inherited the property jointly, each person’s gain and allowance are worked out on their own share individually, not on the property as a whole.

Current CGT Rates and Your Tax-Free Allowance

For residential property, current government rates (from 6 April 2026) charge basic rate taxpayers 18% on gains within their basic Income Tax band and 24% above it, while higher and additional rate taxpayers pay 24% on the whole gain. Everyone also has an annual tax-free allowance, £3,000 for the 2026 to 2027 tax year, which is deducted before any rate is applied.

HMRC provides an official calculator to work through your own figures precisely: the Capital Gains Tax calculator. It’s worth running your actual numbers through it rather than relying on a rough estimate, since the basic/higher rate split depends on your whole year’s taxable income, not just the gain itself.

Reporting and Paying Within 60 Days

This is the deadline that catches people out more than the tax itself. Government guidance is explicit: most UK property sales with a gain to report must be reported, and the tax paid, within 60 days of completion, not by the following January’s Self Assessment deadline as many people assume from other kinds of tax.

Because auction runs to a fixed completion date, 28 or 56 days after the fall of the hammer depending on the track, you know your completion date well in advance, which makes it straightforward to have the 60-day reporting window diarised rather than discovered after the fact.

Government guidance is blunt about what happens if you miss it: “you may have to pay interest and a penalty if you do not report and pay on time.” With an auction completion date fixed weeks in advance, there’s little excuse for the 60-day window catching you out the way it sometimes does on an open-market sale with an uncertain completion date.

Does Private Residence Relief Ever Apply?

Private Residence Relief removes the tax on your own main home, but it generally doesn’t apply to an inherited property unless you, the beneficiary, actually moved in and made it your own main residence for at least part of the time you owned it. Simply inheriting a house that the deceased lived in, without living there yourself, doesn’t bring the relief into play.

If you did move in at any point, even briefly, it’s worth raising with an accountant before you sell, since partial relief can sometimes apply. This is a genuinely fact-specific area, and an accountant or tax adviser, not this guide, is the right source for how it applies to your own situation.

A Worked Example

Illustrative only, using round numbers to show how the pieces fit together, not a real sale. Say you inherited a half-share in a house with your sibling. The probate valuation at the date of death was £320,000, so your base cost is half of that, £160,000. You sell at auction eighteen months later for a hammer price of £360,000, so your half of the sale price is £180,000.

1. Your share of the sale price: £180,000.
2. Less your share of the base cost (probate value): £160,000.
3. Raw gain: £20,000.
4. Less your share of the solicitor and estate agent fees, say £1,500.
5. Gain after costs: £18,500.
6. Less your annual tax-free allowance, £3,000 for 2026 to 2027: £15,500 remains chargeable.
7. If you’re a basic rate taxpayer and this gain sits within your basic Income Tax band, that’s taxed at 18%, a bill of £2,790. A higher rate taxpayer would pay 24%, a bill of £3,720.

Your sibling’s half is worked out exactly the same way, independently, using their own base cost, costs and allowance, which is why two beneficiaries of the same property can end up with different bills even from an identical sale.

What If the Property Was Let Out Before You Sold It?

It’s common for an inherited property to sit empty for a while during probate, and some families choose to let it out rather than leave it vacant while they decide what to do. Renting the property out doesn’t change your base cost, that’s still fixed at the probate value, but it does mean the property was never your own main residence, so Private Residence Relief isn’t in play regardless of how long you owned it before selling.

If this applies to you, the rental income itself is a separate matter from the sale, taxed as income in the years you received it, quite apart from the Capital Gains Tax due when you eventually sell. An accountant can confirm both figures together so nothing is missed. If the property has tenants in place when you come to sell, see the tenanted property auction guide for how that affects the sale itself.

Why Auction Suits a Taxable Inherited Sale

• A known, fixed completion date means you can diarise the 60-day reporting deadline the moment the hammer falls, rather than guessing when an open-market sale might eventually complete.
• Competitive bidding gives you a genuinely market-tested sale price, useful if HMRC or a beneficiary ever questions the figure used in your gain calculation.
• No chain risk once a buyer has reserved, so the completion date you’ve diarised for tax purposes is one you can actually rely on.

Capital Gains Tax Objections, Answered

“Won’t I be taxed on the full value of the house?” No. You’re only taxed on the increase in value between the probate valuation and your eventual sale price, not on the property’s value as a whole.

“I’ve already paid Inheritance Tax, isn’t this double taxation?” They’re different taxes on different things. Inheritance Tax is charged on the estate’s value at death; Capital Gains Tax is charged separately, and only later, on any growth in value after that date. Most inherited properties sold reasonably promptly generate a small gain or none at all.

“What if I don’t know the exact probate value?” It should be recorded in the estate’s own paperwork, usually from a RICS probate valuation obtained at the time (see the probate auction guide for more on this). If it genuinely can’t be found, an accountant can advise on next steps.

“Can I just not report it if the gain is small?” The 60-day reporting rule applies whenever there’s a taxable gain to report, regardless of size, once your allowance is used up. It’s worth reporting correctly and on time rather than risking a penalty for a late or missed return.

None of this is a substitute for advice on your own figures. An accountant can confirm your exact liability in minutes once they have the probate value and your sale price; this guide exists so you go into that conversation already understanding the shape of the calculation.

Thinking about selling an inherited property and want to know what it’s actually worth? Your valuation is free, with no obligation to go ahead.

Get My Free Valuation

Understanding the tax before you sell means there are no surprises afterwards, and a fixed-date auction sale makes the whole thing easier to plan around.

Frequently asked questions

If you’re still unsure how any of this applies to your own inherited property, a conversation with an accountant alongside your free valuation is the most reliable way to plan the sale with no tax surprises waiting at the end of it.