Inheriting a property does not trigger Capital Gains Tax — but selling it usually does. The key is understanding that your CGT base cost is set at the market value on the date of death, so only the gain from that point onwards is taxable. Here is how CGT on inherited property works in 2026/27.
Key CGT Rates and Allowances for 2026/27
| Rate | |
|---|---|
| CGT annual exempt amount | £3,000 |
| Residential property — basic rate taxpayers | 18% |
| Residential property — higher/additional rate taxpayers | 24% |
| Non-residential assets (shares etc.) — basic rate | 18% |
| Non-residential assets — higher/additional rate | 24% |
| 60-day reporting window after completion | Required |
When Does CGT Apply to Inherited Property?
CGT does not apply when you:
- Inherit the property (no disposal event occurs)
- Pass the property to a spouse or civil partner
CGT does apply when you:
- Sell the inherited property
- Gift it to someone other than a spouse/civil partner
- Transfer it out of an estate for valuable consideration
The charge arises on disposal — not on receipt.
How the Probate Value Works
The probate value is the market value of the property at the date of death, agreed with HMRC as part of the estate. This becomes your base cost for CGT — replacing the deceased’s original purchase price.
This is sometimes called the “uplift on death” or “CGT reset.” Any gain made during the deceased’s ownership is effectively wiped clean — you only pay CGT on growth during your own ownership.
Why this matters: If a parent bought a property for £80,000 in 1990, and it was worth £350,000 at death, the beneficiary’s base cost is £350,000 — not £80,000. Only gains above £350,000 after death are subject to CGT.
Worked Example: Selling an Inherited Property
Sarah inherits her mother’s second home. The probate valuation agreed with HMRC is £320,000.
Sarah keeps the property for three years, then sells for £395,000. She pays a solicitor £2,000 and estate agent 1.5% (£5,925).
CGT calculation:
- Sale proceeds: £395,000
- Less probate value (base cost): £320,000
- Less selling costs (solicitor + agent): £7,925
- Gross gain: £67,075
- Less annual exempt amount: £3,000
- Taxable gain: £64,075
Sarah is a higher rate taxpayer:
- CGT: £64,075 × 24% = £15,378
If Sarah had moved into the property as her main home for the full three years, Private Residence Relief would have reduced this to £0.
Private Residence Relief: The Main Exemption
If you move into an inherited property and live in it as your main home, the period of residence is fully exempt from CGT. The final 9 months of ownership always count as a period of residence, even after you have moved out.
Example: James inherits a house in May 2022. He moves in immediately. He moves out in December 2025 and sells in September 2026 — total ownership: 52 months.
- Period as main residence: 43 months (May 2022 – December 2025)
- Final 9 months exemption: 9 months (December 2025 – September 2026)
- Total exempt period: 52 months (full ownership)
- CGT: £0
Letting Relief (Where It Still Applies)
Letting relief was significantly restricted from April 2020. It now only applies where the owner is in shared occupancy with the tenant — i.e. you let out part of the home you are living in. If you inherit a property and let it out (without living there), letting relief does not apply.
Reporting and Paying CGT on Property
Since 2020, you must report and pay CGT on UK residential property within 60 days of completion of the sale. This is done via HMRC’s online CGT service (separate from Self Assessment, though also included in a SA return if you file one).
Failure to report within 60 days attracts a £100 late penalty, with additional penalties if further delayed.
Planning Points: Reducing CGT on an Inherited Property
| Strategy | How it reduces CGT |
|---|---|
| Move in as main residence | Full PRR on period of occupation |
| Time the sale carefully | Use current tax year’s £3,000 annual exempt amount |
| Share ownership with spouse/civil partner | Both £3,000 exemptions available (£6,000 combined) |
| Deduct all qualifying improvement costs | Reduces the gain directly |
| Use basic rate capacity | If taxable income is low, 18% rate applies to the gain |
If you and a co-beneficiary both inherit the property, each person’s share of the gain is assessed separately — both can use their own £3,000 annual exempt amount.
See our CGT on selling a second home guide, transferring assets to a spouse to reduce CGT, and inheritance tax guide.