What This Guide Covers
- Whether CGT applies when you inherit a property
- How the taxable gain is calculated from the probate value
- Current CGT rates for residential property in 2025/26
- Legal strategies to reduce your CGT liability
- Why selling quickly can make a significant difference
Capital Gains Tax on inherited property is one of the most misunderstood areas of estate administration. Many executors and beneficiaries either assume they owe nothing, or panic unnecessarily about a large tax bill. The reality is more nuanced — and with the right advice, your liability can often be reduced significantly.
Do You Pay CGT Simply for Inheriting a Property?
No. Inheriting a property is not a disposal for CGT purposes. You do not pay CGT at the point of inheritance. CGT only becomes relevant when you sell the property — and only if it has increased in value between the date you inherited it and the date of sale.
How Is the Taxable Gain Calculated?
The gain is calculated from the probate value — the open market value of the property at the date of death, as agreed with HMRC for Inheritance Tax purposes. This becomes your base cost.
The taxable gain is then: Sale Price − Probate Value − Allowable Costs − Annual CGT Allowance
Example Calculation — 2025/26
What Are the Current CGT Rates on Inherited Property?
| Taxpayer Band | CGT Rate on Residential Property (2025/26) |
|---|---|
| Basic rate taxpayer | 18% |
| Higher or additional rate taxpayer | 24% |
Using the example above, a higher rate taxpayer would pay 24% of £23,000 = £5,520 in CGT. A basic rate taxpayer would pay 18% = £4,140 — though this depends on their total income in the tax year.
Annual allowance: Every individual has a CGT annual allowance of £3,000 in 2025/26. If the property is inherited by multiple beneficiaries, each can use their own allowance — potentially reducing the collective liability significantly.
How to Reduce Your CGT Liability Legally
1. Sell Quickly
The longer you hold the property after inheritance, the greater the risk of the value increasing and creating a larger taxable gain. Every month the property sits unsold is a month during which any gain can grow. Selling to a cash buyer within weeks of probate being granted keeps the gain as small as possible.
2. Use Multiple Annual Allowances
If the property passes to two or more beneficiaries, each person has their own £3,000 annual allowance. A property inherited equally by three siblings could shelter £9,000 of gain before any CGT is payable.
3. Deduct All Allowable Costs
Solicitor fees, estate agent commissions, survey costs and any improvement works carried out between inheritance and sale can all be deducted from the gain. Keep records of every expense.
4. Get the Probate Valuation Right
A higher probate value means a smaller gain at sale. The probate valuation should accurately reflect the true open market value at the date of death. An under-valuation may save IHT but will increase any future CGT liability — and HMRC is well aware of this dynamic.
Sell Quickly — Reduce Your CGT Exposure
Our free solicitor consultation includes advice on your CGT position. We can complete within 7–28 days of probate being granted.
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