CGT on Inherited Property UK: Probate Base Cost, PR Rate and the 60-Day Clock

When you inherit a UK property, the CGT rules operate very differently from buying at market value. The gain that built up during the deceased's lifetime does not become your tax problem. Under TCGA 1992 s.62, death is not a disposal for CGT purposes, and the property is treated as acquired by the estate (and then by you) at market value on the date of death. That market value, the probate value, becomes your base cost going forward. You only pay CGT on any further growth from that point.

This page is the applied operational guide for beneficiaries who have inherited or are administering an estate that includes UK residential property. It covers how the probate base cost works, who pays CGT (the personal representative or the beneficiary), how the rates differ between those two paths, how private residence relief interacts with inherited property, and when a 60-day return is required. For the broader CGT framework covering rates, allowances and annual returns, see our Capital Gains Tax on UK Property: Complete Guide.

The statutory framework: TCGA 1992 s.62

Section 62 is the load-bearing provision. It does two things.

First, s.62(1)(b) provides that assets of a deceased person shall not be deemed to be disposed of on death. The deceased does not crystallise a CGT gain or loss at the point of death. Decades of appreciation are simply extinguished for CGT purposes at that moment.

Second, s.62(1)(a) provides that the personal representatives (PRs) are deemed to acquire the assets at market value at the date of death. The PRs step into ownership with a fresh acquisition cost equal to the probate value, not the original purchase price. The HMRC manual at CG30540 confirms that the normal computational rules apply to PR disposals, with assets treated as acquired at that death-date market value.

For legatees, s.62(4)(b) extends the same treatment further. Where the PRs assent a property to a beneficiary (the legatee), the beneficiary is treated as if the PRs' acquisition had been their own acquisition. The probate base cost passes through without triggering any further CGT charge on the transfer from the estate to the beneficiary.

The result: whether the PR sells the property during estate administration or assents it to you and you sell it later, the base cost in either case is the probate value at the date of death. The mechanism that resets the base cost to probate value is s.62; it is not the "stepped-up basis" (an American term); the UK descriptor is the death uplift or base cost reset on death.

Where the probate value comes from

The probate value is the open market value of the property at the date of death. It is usually established by an RICS-qualified surveyor instructed by the executors at or near the date of death. For estates above the IHT reporting threshold, it is declared on form IHT400 and agreed with HMRC as part of the estate's IHT process. For smaller estates, it appears on IHT205 (or the equivalent IHT217 for excepted estates). The District Valuer may negotiate the figure with the executors if HMRC considers it too low.

The figure ultimately agreed with HMRC for IHT purposes becomes the s.62 base cost for CGT. Under IHTA 1984 s.171, the value used for IHT is also the value for the estate's CGT purposes. The two taxes use the same reference point, which prevents a beneficiary from claiming a higher CGT base cost than the IHT value the estate declared.

Keep the following documents to support the base cost when you eventually sell:

• The surveyor's valuation report dated at or near the date of death.
• Correspondence with the District Valuer if the probate value was negotiated.
• The relevant pages of IHT400 or IHT205 showing the agreed property value.
• The grant of probate or letters of administration.
• The assent document (if the property was transferred from the estate to you before you sold).

HMRC may enquire into the probate base cost years after the sale if they consider the declared probate value was understated. A contemporaneous surveyor's report is the primary evidence. If the estate did not obtain a formal valuation at the time, HMRC can substitute a lower base cost figure, which increases the chargeable gain.

Two paths: PR sells before assent, or beneficiary sells after assent

There are two routes to a property disposal from a deceased estate. They attract different CGT rates and different annual exempt amounts.

Path 1: personal representative sells before assent

During the administration period, the PRs hold the property as legal owners. If they sell before transferring (assenting) the property to a beneficiary, the gain is the PR's gain. PRs pay residential CGT at 24% (current rate per the GOV.UK rates page). This is a flat rate; PRs do not benefit from the 18% basic-rate band that individual taxpayers can use.

PRs also receive the annual exempt amount (AEA) of £3,000 for the tax year in which death occurred, plus the two immediately following tax years. After the estate's third eligible tax year, no AEA is available. Where the estate cannot be wound up within those three years, the PR pays CGT on the full gain with no exemption.

Path 2: beneficiary sells after assent

Where the PRs assent the property to a beneficiary before it is sold, the beneficiary becomes the disposer. The beneficiary's CGT base cost is the same probate value (via s.62(4)(b)), but the applicable rate is the beneficiary's own marginal CGT rate: 18% if the gain (after AEA and any reliefs) falls within the beneficiary's unused basic-rate income tax band, and 24% on the amount above that band.

The beneficiary also gets their own individual AEA of £3,000 for the tax year of disposal, regardless of how many years have passed since the death.

The rate differential in practice

Who disposes	CGT rate on residential property	AEA
Personal representative	24% (current, flat)	£3,000 (year of death + 2 years only)
Beneficiary (higher-rate taxpayer)	24%	£3,000 per tax year
Beneficiary (basic-rate taxpayer)	18% (on gain within basic-rate band)	£3,000 per tax year

For a basic-rate taxpayer beneficiary, assenting before the sale and having the beneficiary dispose directly saves 6 percentage points on every pound of gain that falls within their basic-rate band. On a £40,000 taxable gain, that is a £2,400 difference. Where the estate has multiple beneficiaries at different tax rates, the path that minimises the collective CGT cost will depend on each beneficiary's own income position in the disposal year.

Worked example: beneficiary sells with a letting period

Rosa inherits a flat on 15 March 2024. The probate value, established by RICS report and accepted by HMRC, is £320,000. Rosa lets the flat from April 2024 to December 2025 (21 months). She moves in in January 2026 and lives there as her main residence until December 2026. She sells in December 2026 for £375,000. Incidental costs of disposal are £5,250 (estate agent fees £3,750 and conveyancing £1,500). Rosa is a higher-rate taxpayer.

Step 1: compute the gross gain.

Item	Amount
Disposal proceeds	£375,000
Less: incidental costs of disposal	(£5,250)
Net proceeds	£369,750
Less: base cost (probate value, TCGA 1992 s.62(1))	(£320,000)
Less: enhancement expenditure (nil assumed)	nil
Gross gain	£49,750

Step 2: compute the PPR fraction. Rosa's ownership period for PPR purposes runs from the date of death (15 March 2024) to the date of sale (December 2026), approximately 33 months. Her period of actual main-residence occupation is January 2026 to December 2026, approximately 12 months. The 9-month final period exemption under TCGA 1992 s.223 applies to the last 9 months of ownership; because Rosa was in actual occupation throughout the final period, the final period adds no additional qualifying months beyond her actual occupation months. PPR fraction: 12 / 33 = 36.4%.

Step 3: apply PPR relief. PPR relief = 36.4% x £49,750 = approximately £18,109.

Step 4: compute the chargeable gain.

Item	Amount
Gross gain	£49,750
Less: PPR relief (36.4%)	(£18,109)
Chargeable gain	£31,641
Less: annual exempt amount (2026/27)	(£3,000)
Taxable gain	£28,641
CGT at 24% (Rosa is higher-rate; full gain above basic band)	£6,874

60-day return required: yes. Rosa is a UK resident selling UK residential property with CGT due. She must report and pay within 60 days of the date of completion.

Worked example: personal representative sells before assent

Using different facts: the PR sells the same flat (probate value £320,000) for £380,000 during the administration period. No PPR is available (the property was not occupied by a legatee as their residence during the administration period under TCGA 1992 s.225A). Death occurred in January 2024 (tax year 2023/24).

Item	Amount
Disposal proceeds	£380,000
Less: base cost (probate value)	(£320,000)
Gross gain	£60,000
Less: PR AEA (2024/25, within the two-year window)	(£3,000)
Taxable gain	£57,000
CGT at 24% (PR rate, current)	£13,680

The 60-day return is required. If instead the PR assents the property to a basic-rate beneficiary who then sells for the same price, the beneficiary pays 18% on the gain within the basic-rate band. On the same £57,000 taxable gain (after their own AEA), that is £10,260 rather than £13,680, a saving of £3,420. The timing of assent is a genuine planning decision.

Private residence relief on inherited property

PPR is available on inherited property in the same way as on any other property, subject to one important difference: the clock starts from when the beneficiary begins to occupy the property as their main residence, not from the date of death.

The deceased's PPR history on the property does not transfer to the beneficiary. Even if the property was the deceased's main home for 40 years, the beneficiary's PPR period begins from their own occupation date.

The 9-month final period exemption under TCGA 1992 s.223(2) means the last 9 months of the beneficiary's ownership (measured from the date of death to the date of sale) always qualify for PPR, provided the property was at some point the beneficiary's only or main residence. This helps in practice where a beneficiary moved in, established PPR, then moved out and the property took time to sell.

During the period between the date of death and the date the beneficiary moves in (and any letting period), the gain attributable to those months does not qualify for PPR. The letting relief previously available for that period was abolished in April 2020 for periods of non-occupation that are not shared-occupancy letting.

Where a legatee occupies the property as their residence during the administration period (before the assent is formally completed), TCGA 1992 s.225A may allow PPR to apply to that period as well. The mechanics of s.225A are fact-specific; this is worth reviewing with a tax adviser where the administration period is prolonged.

The 60-day return: who files and when

Under the rules introduced by Finance Act 2019 Schedule 2, a UK resident must report CGT and pay any tax due within 60 days of the date of completion when they sell UK residential property and CGT is due. This applies to both paths:

• The PR selling during estate administration files and pays within 60 days of completion.
• The beneficiary selling after assent files and pays within 60 days of completion.

The 60-day return is only required where CGT is actually due. Where PPR or other reliefs eliminate the entire chargeable gain, and the AEA reduces any remaining amount to nil, no CGT is due and no 60-day return is required for UK residents.

Non-UK residents are subject to different rules: they must file a non-resident CGT return within 60 days of every UK land disposal, regardless of whether any CGT is due.

Where CGT is due and the 60-day return is not filed on time, interest accrues from day 61 and penalties begin at 5% of the unpaid tax at 6 months, with further charges at 12 months. The 60-day return is separate from the annual self-assessment return; CGT reported on the 60-day return is also declared on the annual return but must not be paid again.

Multiple beneficiaries

Where two or more beneficiaries inherit a property jointly, for example three siblings each inheriting a one-third share under the will, each beneficiary is treated as owning their fractional share for CGT purposes. Each has their own base cost equal to their share of the probate value, and their own AEA for the tax year of disposal.

A disposal of the jointly owned property is treated as a separate disposal by each beneficial owner of their own fractional interest. Each beneficiary computes their own gain and pays CGT at their own marginal rate. One sibling may pay 18% (if they are a basic-rate taxpayer with room in their band) while another pays 24% (higher-rate taxpayer) on the same sale.

Where the beneficiaries agree that one will take the property and the others will receive equivalent cash from the estate (a cash buyout), the transferring beneficiaries are treated as disposing of their shares at market value. That disposal carries CGT consequences for each transferring beneficiary on any gain above their share of the probate value. Planning the structure of the settlement between beneficiaries matters for CGT.

The deed of variation and CGT

A deed of variation (DoV) allows beneficiaries to redirect inherited assets within two years of the death. Under TCGA 1992 s.62(6), where the variation instrument contains the election statement required by s.62(7), the variation is treated for CGT as if the deceased had made the revised disposition. The practical result is that the property is treated as passing directly from the deceased to the new recipient under the original will, rather than from the original beneficiary to the new recipient.

Without the s.62(6) election, a variation that redirects a property from beneficiary A to beneficiary B is treated as a disposal by A at market value, potentially triggering CGT for A on any gain above the probate base cost.

The DoV does not create a second valuation event. The probate value at the original date of death remains the base cost for CGT regardless of when the DoV is executed within the two-year window.

The s.62(6) election is often made together with an election under IHTA 1984 s.142 (which achieves the equivalent IHT read-back). Both elections must be included in the variation document where both CGT and IHT effects are wanted.

IHT already paid: no reduction in CGT gain

A common question is whether IHT paid by the estate reduces the CGT gain when the property is eventually sold. The answer is no. IHT and CGT operate independently, and IHT paid is not a deductible cost for CGT purposes.

IHT is levied on the estate's total assets at the date of death. CGT is levied on the growth in value from the date of death to the date of sale. The two taxes use the same probate value as their reference point, but they are not double-taxing the same amount:

• IHT taxes the value accumulated during the deceased's lifetime (up to death).
• CGT taxes the value accumulated after death (from probate value to sale price).

If a property worth £400,000 at death is subject to IHT at 40% on the amount above the NRB, and later sells for £450,000, the CGT applies only to the £50,000 post-death growth. The IHT charge on the £400,000 is entirely separate and is not deductible against that £50,000 gain.

Letting the inherited property before selling

Where a beneficiary receives an inherited property, lets it for a period, and then sells, the gain is computed in the normal way from probate base cost to sale proceeds. The letting period does not qualify for PPR (unless the beneficiary was in shared occupation with the tenants, which is rare in residential BTL). The portion of the gain attributable to the letting period is fully chargeable.

If the beneficiary eventually moves in and establishes PPR, the PPR fraction applies to the qualifying months of actual main-residence occupation plus the 9-month final period, as in Rosa's example above. The letting-period gain is not washed away by subsequent occupation; it remains chargeable in proportion to the letting months.

For a deeper look at the CGT calculation mechanics specifically where an inherited property has been let, including multi-beneficiary letting scenarios and non-resident beneficiary disposals, see our companion page: CGT on Inherited Rental Property: Calculation Guide.

Records to keep

HMRC may open an enquiry into the CGT computation years after a sale of inherited property, particularly where the claimed probate base cost produces a small gain or a loss. The documents worth keeping are:

• The RICS-qualified surveyor's valuation report dated at or near the date of death.
• Any correspondence with the District Valuer if HMRC challenged the probate value.
• The IHT400 (or IHT205) pages showing the agreed property value.
• The grant of probate or letters of administration.
• The assent document (if the property was transferred from the estate to the beneficiary before sale).
• Receipts for any enhancement expenditure incurred after inheriting (extensions, conversions, structural improvements) that may increase the base cost under TCGA 1992 s.38.

Enhancement expenditure is deductible from the gain in addition to the probate base cost, provided it is capital in nature and is reflected in the state and nature of the property at the date of disposal. Routine repairs and maintenance do not qualify; improvements that add value do.