Capital Gains Tax on Inherited Property. What Executors and Beneficiaries Actually Pay

Inheriting a property does not, by itself, create a Capital Gains Tax bill. The tax only bites later, when the property is sold, and by then many executors and beneficiaries have already been caught out by how the rules actually work. This guide sets out what is taxed, what is not, and the deadlines that catch people out.

Do you pay Capital Gains Tax when you inherit a property?

No. Inheriting an asset is not a disposal, so there is no Capital Gains Tax to pay at the point of death. Instead, the property’s value is rebased to its market value at the date of death, known as the probate value. This becomes the new base cost for the person who inherits it, replacing whatever the deceased originally paid.

Capital Gains Tax only becomes relevant if the property is later sold, or otherwise disposed of, for more than that probate value.

How the gain is calculated

The gain is the difference between the sale price and the probate value, less allowable costs such as estate agent and legal fees on the sale, and any capital improvements made since the date of death. If the property is sold quickly and close to its probate valuation, there may be little or no gain at all. If it is held for a period while the market moves, or while renovation adds value, a taxable gain can build up.

Current rates and allowances

For 2026/27, every individual has an annual exempt amount of £3,000. Gains above that are taxed at 18% within the basic rate band, and 24% for gains that fall into the higher or additional rate band. These are the same rates that now apply to residential property and to other chargeable assets, following the alignment introduced at the Autumn Budget of 30 October 2024.

Where a property is inherited by several beneficiaries, each has their own annual exempt amount, which can make a real difference on a shared gain.

The 60-day reporting rule

Residential property disposals with a UK Capital Gains Tax liability must be reported to HMRC, and any tax paid, within 60 days of completion. This is a separate obligation from Self Assessment, and it applies whether the seller is an executor administering the estate or a beneficiary who has since inherited the property outright. Missing the deadline can trigger automatic penalties, so it is worth flagging early if a sale is being planned.

Selling during the administration period versus after distribution

If the property is sold while it is still held in the estate, before it has been transferred to beneficiaries, the estate itself is treated as the owner for Capital Gains Tax purposes and has its own annual exempt amount for the tax year of death and the following two tax years. If the property is transferred to beneficiaries first and then sold by them individually, each beneficiary uses their own personal allowance and rate band instead. Which route is more tax efficient depends on the beneficiaries’ own income and whether more than one of them will use their allowance.

Private Residence Relief

If a beneficiary moves into the inherited property and it becomes their only or main home, some or all of the gain from that point onward may be covered by Private Residence Relief when they eventually sell. The relief only applies to the period the property was genuinely their main residence, so the calculation needs care where it was let out, left empty, or only occupied part time.

For the full mechanics of getting a property into a state where it can be sold at all, our guide on selling an inherited property covers grant of probate timing, agents and auctions. If you have not yet valued the property for the estate, see our guide on valuing an estate for Inheritance Tax, since the same probate valuation feeds directly into the Capital Gains Tax calculation later.

You can find HMRC’s own guidance on Capital Gains Tax on inherited property and on how to report and pay Capital Gains Tax within the 60-day window.

Getting the probate valuation right matters twice over

The value used on the Inheritance Tax return is the same figure that sets the Capital Gains Tax base cost. An undervaluation might reduce an Inheritance Tax bill slightly, but it stores up a larger Capital Gains Tax bill for whoever sells the property later, and HMRC can challenge valuations on either side. A professional valuation at the date of death protects both figures.