If you have inherited a property in the UK and are thinking about selling it, one of the biggest questions is often whether you will have to pay Capital Gains Tax.

The short answer is reassuring: you do not pay Capital Gains Tax simply because you inherit a property. The act of inheriting it does not trigger a Capital Gains Tax bill.

However, that does not mean Capital Gains Tax can be ignored altogether. If you later sell the inherited property for more than its value at the date of death, Capital Gains Tax may apply on the profit you make.

This guide explains how Capital Gains Tax works on inherited property in the UK, what value is used as your starting point, the 2025/26 tax rates and allowances, and some of the main ways people can reduce the bill legally.

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

No. Inheriting a property does not itself create a Capital Gains Tax bill.

That is one of the most important things to understand at the outset. When a house or flat passes to you through an estate, there is no Capital Gains Tax to pay at that point just because ownership has transferred.

The tax question only becomes relevant if and when you sell the inherited property.

When does Capital Gains Tax apply to inherited property?

Capital Gains Tax usually comes into the picture when you sell the inherited property and it has increased in value since the person who owned it died.

Capital Gains Tax is a tax on the gain, not the full sale price. In other words, it is a tax on the profit you make between the property’s value when you inherited it and the amount you eventually sell it for, after taking account of allowable costs and any available reliefs.

What value do you use for an inherited property?

This is one of the most important parts of the whole calculation.

For Capital Gains Tax purposes, you do not use the price the deceased originally paid for the property, even if they bought it decades ago. Your starting point is the probate value.

The probate value is the property’s market value on the date of death. That figure becomes your “base cost” for Capital Gains Tax.

So if someone bought a house for £40,000 many years ago, but it was worth £300,000 when they died, £300,000 is the figure that matters for your Capital Gains Tax calculation, not £40,000.

What is Capital Gains Tax?

Capital Gains Tax, often shortened to CGT, is a tax on the profit made when you sell an asset that has gone up in value.

When inherited property is involved, the “gain” is broadly the difference between:

• the probate value of the property at the date of death, and
• the sale price when you eventually sell it,

less any allowable selling costs and any reliefs you are entitled to.

The Capital Gains Tax allowance for 2025/26

For the 2025/26 tax year, individuals have a Capital Gains Tax annual exempt amount of £3,000.

This means the first £3,000 of your gain is tax-free. You only start paying Capital Gains Tax on the part of your gain above that allowance.

If two people inherit and jointly own the property, each person may be able to use their own annual exemption, which can make a useful difference to the final tax bill.

Capital Gains Tax rates on inherited residential property

For inherited residential property sold in the 2025/26 tax year, the Capital Gains Tax rates are generally:

• 18% for gains that fall within the unused part of your basic rate income tax band
• 24% for gains that fall into the higher rate band

The rate you pay depends on your taxable income and the size of the gain. In simple terms, you need to look at your other income for the tax year and then see whether the gain pushes you into a higher tax bracket.

That means two people selling similar inherited properties could pay different amounts of Capital Gains Tax depending on their overall income.

How to work out Capital Gains Tax on an inherited property

A basic Capital Gains Tax calculation usually works like this:

Step 1: Start with the sale price

Take the amount the property is sold for.

Step 2: Subtract the probate value

Take away the market value of the property at the date of death.

This gives you the initial gain.

Step 3: Deduct allowable selling costs

You can normally deduct costs directly connected to the sale, such as:

• estate agency fees
• solicitor or conveyancing fees
• certain valuation fees related to the disposal

These reduce the gain before tax is calculated.

Step 4: Deduct any allowable improvement costs

In some cases, capital improvements may also be deductible, although ordinary repairs and maintenance are treated differently from genuine capital improvements. This is an area where records matter and professional advice can be sensible.

Step 5: Deduct your annual exempt amount

For 2025/26, that is £3,000 per individual.

Step 6: Apply the relevant tax rate

Once the taxable gain has been worked out, the appropriate rate of 18% or 24% is applied depending on your income tax position.

A simple example

Let’s say:

• the inherited property had a probate value of £300,000
• you sell it later for £340,000
• estate agent and legal fees come to £5,000

The calculation would look like this:

Sale price: £340,000
Less probate value: £300,000
Initial gain: £40,000

Less selling costs: £5,000
Gain after costs: £35,000

Less annual exemption: £3,000
Taxable gain: £32,000

You would then apply the relevant Capital Gains Tax rate to that £32,000 taxable gain.

Can you reduce Capital Gains Tax on an inherited property?

Potentially, yes.

There are several legitimate ways the tax bill may be reduced, depending on the circumstances. Not every route will apply to every seller, but the main areas people look at are:

• using the annual exemption
• deducting allowable costs
• owning the property jointly with a spouse or civil partner
• Private Residence Relief, where available
• timing the sale carefully

Private Residence Relief: one of the biggest ways to reduce CGT

One of the most powerful reliefs is Private Residence Relief (PRR).

If you move into the inherited property and it genuinely becomes your main home, some or all of the gain may be exempt from Capital Gains Tax. In the right circumstances, this can reduce the Capital Gains Tax bill significantly and in some cases remove it altogether.

However, this is an area where the detail matters. Simply spending a bit of time at the property is not the same as genuinely occupying it as your main residence. HMRC will look at the facts, so it is important not to assume this relief applies automatically.

If you are considering moving into an inherited property before selling it, it is worth taking advice on how Private Residence Relief works and what evidence you would need.

What if the inherited property is jointly owned?

If the inherited property is owned jointly, this can sometimes help reduce the Capital Gains Tax bill because each owner has their own annual exempt amount.

For example, if a married couple or civil partners jointly own a property and both are liable to CGT, each may be able to use their own £3,000 annual exemption for 2025/26, giving a combined tax-free amount of £6,000.

Depending on the circumstances, joint ownership can also affect how gains are split between the owners and which tax rates apply.

Can timing make a difference?

Sometimes, yes.

Tax planning is not just about the size of the gain; timing can matter too. Depending on the circumstances, sellers may want to consider:

• whether the sale falls into a tax year where their income is lower
• whether a gain could be shared between joint owners
• whether there is any flexibility around the tax year in which the disposal takes place

The sale of a property is treated for Capital Gains Tax purposes by reference to the date of exchange of contracts, not completion, so timing questions should be considered early if they are relevant.

Capital Gains Tax deadlines on inherited property sales

One of the most important practical points is the reporting deadline.

If you sell a UK residential property and Capital Gains Tax is due, you generally need to:

• report the disposal to HMRC, and
• pay the Capital Gains Tax due

within 60 days of completion.

This is a tight deadline and it catches people out. It is not something to leave until the end of the tax year.

What happens if you miss the 60-day deadline?

Missing the Capital Gains Tax reporting deadline can lead to:

• late filing penalties
• interest on unpaid tax
• further penalties if the delay continues

Even if you are already dealing with probate, clearing a house or organising a sale, HMRC’s deadlines still apply. That is why it is important to think about the Capital Gains Tax position before or during the sale process, not afterwards.

What costs can be deducted?

When calculating Capital Gains Tax on an inherited property, certain costs connected with the sale can normally be deducted from the gain. These often include:

• estate agent fees
• conveyancing or solicitor fees on the sale
• some professional valuation costs linked to the disposal

There may also be scope to deduct capital improvement costs where genuine improvements have been made to the property, but this area can be more nuanced than many people expect. General repairs, decoration and routine maintenance are not treated in the same way as capital improvements.

Because the distinction matters, it is sensible to keep invoices and records if money has been spent on the inherited property before sale.

Does everyone who sells an inherited house pay Capital Gains Tax?

No.

Some inherited property sales do not create a Capital Gains Tax bill at all. For example:

• the property may be sold for roughly the same amount as its probate value
• the gain may be small enough to fall within the annual exemption
• Private Residence Relief may apply
• allowable costs may reduce the taxable gain significantly

That is why it is so important not to assume there will definitely be a tax bill, but equally not to assume there will not be one.

How Capital Gains Tax fits into the wider inherited-property picture

Capital Gains Tax is only one part of the financial picture when you inherit a house. Families are often also dealing with:

• probate
• Inheritance Tax
• empty property costs
• deciding whether to sell as is or carry out work first
• disagreements between beneficiaries
• how quickly the property needs to be sold

From a practical point of view, the Capital Gains Tax question often overlaps with the sale strategy. For example:

• if the property is likely to rise in value while it is being held, that may increase the eventual gain
• if the house is empty for a long period while decisions are delayed, costs can mount up
• if improvements are carried out before sale, the tax treatment of those costs may matter

Key points to remember about Capital Gains Tax on inherited property

If you only remember a few things, make them these:

• You do not pay Capital Gains Tax when you inherit a property
• Capital Gains Tax may apply when you sell
• the key starting point is the probate value at the date of death
• for 2025/26, the annual Capital Gains Tax allowance is £3,000 per individual
• residential property gains are generally taxed at 18% or 24% depending on income
• allowable selling costs can reduce the gain
• Private Residence Relief may reduce or eliminate the tax if the inherited property became your main home
• if tax is due, you usually have 60 days from completion to report and pay it

Final thoughts

Capital Gains Tax on inherited property is one of those areas where the headline rule is simple — no tax when you inherit, possible tax when you sell — but the detail can make a big difference to the final bill.

The value at the date of death, the costs of sale, whether you have lived in the property, whether it is jointly owned and your overall income can all affect the amount of tax due. For some people the bill is modest or non-existent. For others, it can be a significant cost that needs to be factored into decisions about when and how to sell.

If you have inherited a property and are thinking about selling, it is worth getting clear on the numbers early. That way, you can understand the likely tax position before the sale completes and avoid surprises after the event.

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