Do you pay capital gains tax on an inherited or gifted property?

In England, Wales, Scotland and Northern Ireland, capital gains tax is a UK tax, so the core CGT rules on inherited and gifted property are not devolved. The practical answer turns on when the property is sold or gifted, who owns it at that point, and whether the gain is measured from death-date value, original cost, or market value.

Do you pay capital gains tax when you sell an inherited property?

You do not pay capital gains tax when you inherit a property, but you may pay CGT when you later sell an inherited property for more than its market value at the date of death. TCGA 1992 treats the property as acquired on death for “a consideration equal to their market value at the date of the death”, and GOV.UK says: “You do not pay Stamp Duty, Income Tax or Capital Gains Tax immediately if you inherit a property.” That is the capital gains exemption after death: death itself is not the taxable disposal, because the deceased’s assets “shall not be deemed to be disposed of by him on his death”. CGT on selling an inherited property is calculated on the later sale gain: sale proceeds, less the death-date probate value or IHT-agreed value, less allowable costs and reliefs. If the inherited house is not your main home, GOV.UK’s rule is blunt: “You will pay it if you make a profit when you sell a property that is not your main home.” A UK residential property CGT return is normally due by the 60th day after completion.

Who pays the capital gains tax on a deceased person's property, the estate or the beneficiary?

The estate pays CGT if the personal representatives sell the deceased person’s property during administration; the beneficiary pays CGT if the property has first been transferred or assented to them and they later sell it. HMRC’s death helpsheet says: “During the period of administration, the personal representatives may be liable to CGT if they sell or otherwise dispose of any of the assets in the estate.” Once the inherited property has vested in a legatee, HMRC’s manual says: “When an asset has vested in a legatee the capital gain or allowable loss on a subsequent disposal of the asset accrues to that legatee.” The rate can also differ: personal representatives are charged at 24%, while an individual is charged at 18% or 24% depending on their circumstances. The administration choice matters because personal representatives have the annual exempt amount only for the tax year of death and the next two tax years, while beneficiaries may each have their own annual exempt amount if they become the sellers.

Is capital gains tax on an inherited property different in Scotland?

Capital gains tax on an inherited property is not different in Scotland: CGT is UK-wide, TCGA 1992 applies across the UK, and Scotland’s different inheritance wording is succession procedure, not a separate CGT regime. The statute marks the death rule as “62 Death: general provisions.U.K.”, and HMRC’s death helpsheet says: “Many taxation principles are the same in Scotland and Northern Ireland.” GOV.UK’s inherited-property page says “The rules are different in Scotland”, but that warning sits in a page covering inheritance and property procedure; it does not create a Scottish CGT rate, death uplift, or inherited-property exemption. The Scottish Government’s devolved-tax list does not include CGT, and its own discussion of wealth taxes says: “The two other current major sources of tax from wealth and capital are administered by the UK Government.” Scottish executry labels and succession steps can differ, but the capital gains calculation still starts from market value at death and taxes the later disposal in the same UK CGT code.

What is the three-year rule for a deceased estate?

The three-year rule for a deceased estate is that personal representatives get the individual annual exempt amount for the tax year of death and the next two tax years, but not after that. TCGA 1992 s.1K says: “For the tax year in which an individual dies and for the next two tax years, this section applies to the individual's personal representatives as if references to the individual were to those personal representatives.” That is three tax years in total, not three years from probate and not a CGT-free sale period. If the estate sells an inherited property during that window, the personal representatives can use the annual exempt amount against estate gains; after the window, the estate loses that allowance. This is separate from the two-year deed-of-variation rule and the six-month probate or family-provision waiting rules. For estates with rising property values, delaying a sale past the third tax year can turn a modest taxable gain into a larger 24% estate CGT charge.

What is the two-year rule on an inherited property?

The two-year rule on an inherited property is mainly the deadline for a written deed of variation or disclaimer to be read back for IHT and CGT purposes, not a two-year CGT-free window for selling the property. For CGT, TCGA 1992 applies where, within “the period of 2 years after a person’s death”, inherited dispositions are varied or disclaimed by an instrument in writing. For IHT, IHTA 1984 uses the same basic timing, beginning: “Where within the period of two years after a person’s death—”. GOV.UK also says that if inheriting a property means you own two properties, you must tell HMRC which is your main home within two years, but the statute allows a later main-residence notice in the narrow case where only one residence had more than negligible market value. The two-year rule therefore helps with redirecting an inheritance or making a main-home nomination; it does not exempt a later inherited-property sale from CGT.

What is the six-month rule for probate?

The six-month rule for probate usually means the family-provision claim period after a grant, not a legal deadline to apply for probate. In England and Wales, a claim under the Inheritance (Provision for Family and Dependants) Act 1975 normally cannot be made “after the end of the period of six months from the date on which representation with respect to the estate of the deceased is first taken out” unless the court gives permission. Northern Ireland has a similar six-month-from-grant rule. Scotland is different for a cohabitant’s intestacy claim: the application must be made “before the expiry of the period of 6 months beginning with the day on which the deceased died.” There is also a separate IHT payment timing rule: inheritance tax on a chargeable transfer is generally due six months after the end of the month of death. For CGT, the six-month probate rule does not change the market-value-at-death uplift or create a special inherited-property exemption.

Who pays the capital gains tax when a property is gifted?

The donor usually pays the capital gains tax when a property is gifted, because a gift is treated as a disposal at market value even if the donor receives no money. HMRC’s gift relief helpsheet says: “In the absence of Hold-over Relief, you’ll be treated as though you had disposed of the asset for the market value for the purposes of CGT.” That is why parents gifting a rental property to a child can face CGT immediately: the child does not pay for the gift, but the parent is taxed as though the property had been sold for its open-market value. Hold-over relief is not a general escape route for ordinary family gifts, because HMRC says: “Hold-over Relief is available if the disposal is a chargeable transfer for Inheritance Tax purposes, but not a Potentially Exempt Transfer (PET).” If the donor does not pay assessed CGT for 12 months, HMRC may have a fallback against the recipient, but the recipient can recover that amount from the donor.

Can you avoid capital gains tax on a gifted property?

You normally cannot avoid CGT by simply gifting a let property to a child: GOV.UK’s Gift Hold-Over Relief page says “You do not pay Capital Gains Tax on any assets you give away”, but that is false for a typical outright gift of a rental property to a child because the donor is taxed at market value unless a real relief applies. HMRC’s own helpsheet gives the operative rule: “In the absence of Hold-over Relief, you’ll be treated as though you had disposed of the asset for the market value for the purposes of CGT.” A buy-to-let property is usually an investment, and HMRC states: “Although property income is now computed like trading income, letting is still not a trade.” An outright gift to a child is normally a PET, and hold-over relief is “not a Potentially Exempt Transfer (PET)” relief. Genuine CGT routes include no-gain/no-loss transfers between spouses or civil partners in qualifying circumstances, private residence relief where the property has been the owner’s main home, or waiting until death, when death itself is not a CGT disposal.

How is capital gains tax handled on property held in a trust?

Capital gains tax on property held in a trust depends on the trust type: a bare trust is taxed on the beneficiary, while other trustees can pay CGT at 24%, with a reduced annual exempt amount. HMRC’s trust helpsheet says: “Where there is a bare trust, anything done by the trustee is regarded as done by the beneficiary.” For non-bare trusts, HMRC says: “For disposals on or after 30 October 2024 the rate of CGT applying to all assets for trustees is 24%.” The trustee annual exempt amount is usually half the individual amount, because TCGA Schedule 1C applies the annual exempt amount “as if the annual exempt amount for the year were one-half of the amount available for the individual for the year.” Putting property into a settlement is itself a market-value disposal, and when a beneficiary becomes absolutely entitled, trustees are deemed to dispose of and reacquire the settled property at market value. Private residence relief can still apply where a person entitled under the settlement occupies the property as their only or main residence.

Last reviewed September 2026.

Sources

• Taxation of Chargeable Gains Act 1992 s.62 — “shall be deemed to be acquired on his death by the personal representatives or other person on whom they devolve for a consideration equal to their market value at the date of the death” Source
• GOV.UK, Tax on property, money and shares you inherit — “You do not pay Stamp Duty, Income Tax or Capital Gains Tax immediately if you inherit a property.” Source
• Taxation of Chargeable Gains Act 1992 s.62 — “shall not be deemed to be disposed of by him on his death” Source
• GOV.UK, Tax on property, money and shares you inherit — “You will pay it if you make a profit when you sell a property that is not your main home.” Source
• Finance Act 2019 Schedule 2 — “must deliver the return to an officer of Revenue and Customs on or before the 60th day following the day of the completion of the disposal.” Source
• HMRC HS282, Death, personal representatives and legatees — “During the period of administration, the personal representatives may be liable to CGT if they sell or otherwise dispose of any of the assets in the estate.” Source
• HMRC Capital Gains Manual CG31180 — “When an asset has vested in a legatee the capital gain or allowable loss on a subsequent disposal of the asset accrues to that legatee.” Source
• Taxation of Chargeable Gains Act 1992 s.1H — “Chargeable gains accruing in a tax year to the personal representatives of a deceased individual are charged to capital gains tax at a rate of 24%.” Source
• Taxation of Chargeable Gains Act 1992 s.1H — “Chargeable gains accruing in a tax year to an individual are charged to capital gains tax at a rate of 18% or 24%.” Source
• Taxation of Chargeable Gains Act 1992 s.62 — “62 Death: general provisions.U.K.” Source
• HMRC HS282, Death, personal representatives and legatees — “Many taxation principles are the same in Scotland and Northern Ireland.” Source
• Scottish Government, Wealth and capital taxes — “The two other current major sources of tax from wealth and capital are administered by the UK Government.” Source
• Taxation of Chargeable Gains Act 1992 s.1K — “For the tax year in which an individual dies and for the next two tax years, this section applies to the individual's personal representatives as if references to the individual were to those personal representatives.” Source
• Taxation of Chargeable Gains Act 1992 s.62 — “the period of 2 years after a person’s death” Source
• Inheritance Tax Act 1984 s.142 — “Where within the period of two years after a person’s death—” Source
• Inheritance (Provision for Family and Dependants) Act 1975 s.4 — “after the end of the period of six months from the date on which representation with respect to the estate of the deceased is first taken out” Source
• Family Law (Scotland) Act 2006 s.29 — “before the expiry of the period of 6 months beginning with the day on which the deceased died.” Source
• HMRC HS295, Relief for gifts and similar transactions — “In the absence of Hold-over Relief, you’ll be treated as though you had disposed of the asset for the market value for the purposes of CGT.” Source
• HMRC HS295, Relief for gifts and similar transactions — “Hold-over Relief is available if the disposal is a chargeable transfer for Inheritance Tax purposes, but not a Potentially Exempt Transfer (PET).” Source
• GOV.UK, Gift Hold-Over Relief — “You do not pay Capital Gains Tax on any assets you give away.” Source
• HMRC Property Income Manual PIM4300 — “Although property income is now computed like trading income, letting is still not a trade.” Source
• HMRC HS294, Trusts and Capital Gains Tax — “Where there is a bare trust, anything done by the trustee is regarded as done by the beneficiary.” Source
• HMRC HS294, Trusts and Capital Gains Tax — “For disposals on or after 30 October 2024 the rate of CGT applying to all assets for trustees is 24%.” Source
• Taxation of Chargeable Gains Act 1992 Schedule 1C — “as if the annual exempt amount for the year were one-half of the amount available for the individual for the year.” Source
• Taxation of Chargeable Gains Act 1992 s.71 — “for a consideration equal to their market value.” Source