Do I pay Capital Gains Tax when I sell a property I inherited?

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Inheriting a property does not itself trigger an immediate tax charge, but selling it later can create a Capital Gains Tax liability, and understanding exactly how the taxable gain is calculated (using the value at the date of death, not the original purchase price paid decades earlier) is essential to avoid overpaying. **Why the value resets at death** When someone dies, their assets (including property) are generally revalued at their open market value at the date of death for both Inheritance Tax and Capital Gains Tax purposes -- this "probate value" becomes the new base cost for whoever inherits the property, meaning any increase in value that happened during the deceased's own lifetime of ownership is not later subject to Capital Gains Tax when the inheritor eventually sells; only growth AFTER the date of death is potentially taxable. **How the gain is calculated on eventual sale** When the inheritor later sells the property, Capital Gains Tax is calculated on the difference between the sale price (less allowable selling costs) and the probate value at the date of death (plus any allowable costs incurred by the inheritor, such as improvement costs, though not routine maintenance) -- this is the same basic CGT calculation used for any other property disposal, just using the date-of-death value as the acquisition cost rather than an original purchase price. **Worked example** A property was purchased by the deceased decades ago for £50,000, but was worth £300,000 at the date of their death. The inheritor sells the property two years later for £320,000. The taxable gain for Capital Gains Tax purposes is calculated as £320,000 minus £300,000 (the probate value, not the original £50,000 purchase price) = £20,000, less any available annual exempt amount and allowable selling costs -- the £250,000 of growth that happened during the deceased's own ownership (£300,000 minus £50,000) is not subject to Capital Gains Tax at all, since Inheritance Tax (if any was due) has already dealt with the value at death. **Private Residence Relief if you live in the property** If the inheritor moves into the inherited property and makes it their only or main residence before eventually selling it, some or all of the gain arising after the date of death may be covered by Private Residence Relief, in the same way as for any other main home -- this depends on how the periods of ownership and occupation are structured and is a valuable relief where genuinely applicable, but does not apply automatically just because the property was inherited. **Multiple beneficiaries and shared inherited property** Where a property is inherited jointly by more than one beneficiary (for example, siblings inheriting equally), each beneficiary is separately liable for Capital Gains Tax on their own share of any gain when the property is eventually sold, each potentially using their own annual CGT exempt amount against their portion of the gain -- this can sometimes make it more tax-efficient for multiple siblings to jointly own and eventually sell an inherited property together rather than one buying out the others immediately. **Selling shortly after death often produces little or no gain** Because the probate value resets the acquisition cost to the date-of-death figure, a property sold relatively soon after death (before it has had much time to increase further in value) often produces a very small taxable gain, or even a loss if selling costs and a falling market are factored in -- getting an accurate, well-evidenced probate valuation at the time of death is therefore valuable both for Inheritance Tax and for correctly minimising any later Capital Gains Tax. **Practical tip** Keep clear evidence of the property's probate value at the date of death (a proper professional valuation is far more defensible to HMRC than an informal estimate), track any allowable improvement costs you incur as the new owner, and calculate any Capital Gains Tax due on eventual sale using the date-of-death value as your acquisition cost, not the price the deceased originally paid for the property.

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