CGT on a Property You Inherited From Your Parents: The Probate Value Starting Point
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CGT on a Property You Inherited From Your Parents: The Probate Value Starting Point
The value put on your parents' house for probate, its market value on the date they died, becomes your acquisition cost for Capital Gains Tax. When you sell, you are taxed only on the growth between that probate value and your sale price, after deducting selling costs, qualifying improvements and your annual exempt amount, which is £3,000 for the 2026/27 tax year.
That single rule explains almost every question that follows a house inheritance, and it is also where most of the confusion sits, because the figure used for probate was often not a formal valuation at all. It might have been an estate agent's letter, a rough online estimate, or a figure the family simply agreed felt about right at a difficult time. That number now has a job to do for tax purposes that it was probably never prepared for.
Why the probate value replaces what your parents paid
There is no Capital Gains Tax charge when someone dies. Under section 62 of the Taxation of Chargeable Gains Act 1992, any asset a person owned is treated as acquired by their personal representatives, or by you as the person who inherits it, at its market value on the date of death. Any growth in value during your parents' lifetime disappears for Capital Gains Tax purposes. What did not disappear is the growth that happens after death, from the probate value to whatever you eventually sell for, and that is the figure HMRC cares about.
This means the price your parents originally paid for the house, sometimes decades earlier and for a fraction of its current value, is irrelevant to your calculation. Only two dates matter: the date of death, and the date you sell.
Working out the gain: a worked example
Say your mother died in January 2025 and the house was given a probate value of £320,000, based on an estate agent's appraisal at the time. You sell the property in November 2026 for £355,000. Before completion you spent £4,000 replacing the boiler, which counts as a capital improvement, and paid £6,500 in estate agent and legal fees on the sale.
Your gain is calculated as £355,000 minus £320,000 minus £4,000 minus £6,500, which comes to £24,500. Deduct your £3,000 annual exempt amount for 2026/27 and £21,500 remains taxable. If your other income for the year already uses up your basic rate band, the whole £21,500 is taxed at 24%, giving a bill of £5,160. If you have £10,000 of unused basic rate band available, £10,000 is taxed at 18% and the remaining £11,500 at 24%, giving a combined bill of £4,560. The £600 difference exists purely because of where the gain lands against your income for the year, which is why the timing of a sale, not just the price achieved, is worth thinking about.
What if the property was never formally valued for probate
Most estates in the UK now qualify as excepted estates, meaning the personal representatives are not required to submit the full Inheritance Tax account, form IHT400. Instead, the estate's value, including the property, is simply declared as part of the probate application itself. HMRC does not routinely scrutinise that figure at the time in the way it would for a taxable estate.
This matters because when there is no full IHT400, there is usually no request for the Valuation Office Agency to review or agree the figure at the outset. The probate value effectively goes unchallenged unless something later draws HMRC's attention to it, most commonly a subsequent sale at a very different price. At My Tax Accountant, the situation we see most often is a family who put down a round number for probate, often supplied informally by an estate agent hoping to win the eventual sale instruction, with no written valuation report kept on file. That number then has to stand up years later as the CGT base cost, sometimes without much supporting evidence behind it.
The practical lesson is straightforward. Whether or not the estate needs a full IHT return, it is worth obtaining and keeping a proper written valuation from a qualified surveyor, dated as close to the date of death as possible, along with any comparable sale evidence from the immediate area. This does not need to be a full Royal Institution of Chartered Surveyors Red Book valuation for every estate, but a documented, defensible opinion of value is far stronger evidence than an estate agent's verbal figure if the position is ever questioned.
Interactive Explainer on CGT on Inherited Property
Navigating Capital Gains Tax on an inherited property can be complex, but this interactive widget breaks down exactly how your parents' probate value becomes your starting point for tax purposes. It clarifies crucial HMRC rules, dispels common myths surrounding property valuation, and highlights vital reporting deadlines. To get started, simply read through the expandable guidance sections to understand your obligations, then input your own figures into the built-in calculator to estimate your potential tax liability. Created specifically for UK taxpayers by My Tax Accountant, this tool ensures you have the clarity needed to manage your property sale with confidence.
Can HMRC challenge the probate value after you have already sold
Yes, and this is becoming more common. Where a property is included in the valuation of an estate, HMRC can refer the figure to the Valuation Office Agency, whose District Valuers are chartered surveyors who compare the declared value against Land Registry data and comparable sales. Analysis of Freedom of Information data obtained by a firm of solicitors and reported across the property and legal press indicates that referrals to the Valuation Office Agency rose from 11,845 to 14,631 in the year to September 2025, an increase of close to 25%. A sale that significantly exceeds the probate value, particularly one that happens within a year or two of death, is one of the clearest triggers for this kind of review.
If HMRC and the Valuation Office Agency conclude the date of death value should have been higher, two things happen at once, and this is the interaction that most general guidance misses. First, if the estate was below the Inheritance Tax threshold on the original figures but the revision pushes it over, or increases an existing liability, additional Inheritance Tax becomes due, along with interest running from six months after the end of the month of death. Second, and this is the point that softens the blow, your Capital Gains Tax base cost rises by exactly the same amount.
A higher agreed date of death value means a smaller gain when you come to sell, so more Inheritance Tax paid now can mean less Capital Gains Tax paid later. It is not a straightforward loss, though the two taxes are rarely payable by exactly the same people at exactly the same time, so the practical impact on your own tax position needs checking rather than assumed.
The "four year" claim that people often get wrong
A significant number of guides describe the relief for property sold at a loss shortly after death as a four year rule. It is not, and the distinction matters if you are relying on it. Under section 191 of the Inheritance Tax Act 1984, the sale itself must take place within three years of the date of death for the relief to be available at all. What runs for up to four years is only the deadline for making the claim once a qualifying sale has happened, not the window in which the sale must occur. If you sell in year four expecting to still qualify because you have heard of a "four year rule," the sale itself will already be too late, regardless of when you get round to claiming.
Where the relief does apply, the sale price is substituted for the probate value for Inheritance Tax purposes, which can produce a repayment of Inheritance Tax already paid. If that election is made, the same substituted figure also becomes your Capital Gains Tax base cost, which usually reduces or eliminates a gain that would otherwise have arisen, though the position needs modelling properly rather than assumed, since claiming the relief removes the higher original probate value from the calculation entirely.
UK CGT on Inherited Property: Probate Value Rules
Key Aspect | Rule or Mechanism | Impact on CGT |
Probate Valuation Starting Point (Base Cost) | Under Section 62 TCGA 1992, the acquisition cost/base cost for CGT is reset to the property's Open Market Value (OMV) at the date of death, completely extinguishing lifetime capital gains. If the value was formally ascertained under Section 274 for Inheritance Tax (IHT) purposes, it is binding as the base cost; if un-ascertained (e.g., estate below IHT threshold), a fresh valuation must be established upon disposal. | Establishes the baseline cost to calculate chargeable capital gains or losses upon a subsequent sale. CGT applies only to the post-death gain accrued between the date-of-death probate value and the eventual sale price (minus allowable expenses under Section 38 TCGA 1992, such as enhancement and legal/selling fees). |
Valuation Scrutiny & VOA Checks | HMRC cross-references declared valuations with market data and may refer suspect appraisals (e.g., non-RICS estate agent estimates) to the Valuation Office Agency (VOA) under Schedule 36 FA 2008 or Section 217 IHTA 1984. Taxpayers can request a Post-Transaction Valuation Check (Form CG34) prior to filing returns. | An upward revision of an un-ascertained date-of-death valuation increases the CGT base cost, eliminating or reducing taxable capital gains without incurring IHT. Agreeing values via Form CG34 or obtaining RICS Red Book evidence provides a defensible base cost and prevents unexpected reassessments or penalties. |
Private Residence Relief (PRR) | Under Sections 222–225A TCGA 1992, PRR applies to disposals of a dwelling house (including up to a 0.5-hectare permitted area). The relief extends to personal representatives or trustees if a qualifying beneficiary entitled under the will/trust resided in the property as their main residence between death and sale. | Fully or partially exempts property gains from CGT for periods of qualifying residential occupation, shielding the estate or beneficiary from CGT accrued during administration or ownership. |
CGT Tax Rates & Annual Exempt Amount (AEA) | Residential property capital gains are taxed at 18% for basic rate taxpayers and 24% for higher/additional rate taxpayers, personal representatives, and trustees (previously 28% prior to October 30, 2024). The Annual Exempt Amount is £3,000 for individuals (and £1,500 for personal representatives/trustees). | Determines the percentage of tax owed on net gains exceeding the annual tax-free allowance. Appropriating property shares to beneficiaries under Section 62(4) TCGA 1992 prior to exchange allows each beneficiary to utilize their individual £3,000 allowance and 18% basic-rate bands. |
If you sell soon after death for less than the probate value
The reverse situation is more common than people expect, particularly where a probate valuation was set optimistically, or the market has softened between the date of death and the sale. If you sell for less than the probate value, after allowable costs, you may have an allowable capital loss rather than a gain. That loss can be set against other gains you make in the same tax year, or carried forward against future gains, though it cannot generate a cash refund on its own. If several beneficiaries jointly inherited the property, each is assessed on their own share of the gain or loss and has their own annual exempt amount, so the outcome can differ from one sibling to another depending on their wider tax position for the year.
Interactive Explainer on CGT on Property You Inherited From Your Parents
This interactive explainer walks you through Capital Gains Tax on a property you inherited from your parents, focusing on the crucial role of the probate (date-of-death) value as your starting point for any future sale. Use the tabs to explore the rules, see a worked example, understand when HMRC can challenge a valuation, and check the strict 60-day reporting deadline. The built-in calculator lets you enter your own figures to estimate the gain and tax due under the 2026/27 rates and £3,000 annual exempt amount. Simply click through the sections and adjust the numbers to match your situation for clear, practical guidance tailored to UK taxpayers.
Reporting and paying: the 60 day deadline
Where Capital Gains Tax is due on the sale of a UK residential property, you must report and pay it within 60 days of completion, using HMRC's online property account rather than waiting for the annual Self Assessment deadline. This is a strict deadline, and penalties apply for late reporting even where the correct tax is eventually paid on time. If you also file a Self Assessment return, the disposal needs to be included there as well, so the figures match across both submissions.
Scotland and Wales
The Capital Gains Tax rules described above apply identically across the whole of the UK, since Capital Gains Tax is not devolved. What differs in Scotland is the terminology and process around the grant itself, where the equivalent of probate is called confirmation, and the timescales for obtaining it can vary from those in England and Wales. In Wales, the process mirrors England exactly, since probate and Capital Gains Tax are both reserved matters. In practice, the substance of the probate value and its role as your CGT base cost is the same wherever in the UK the property sits.
What to do now
Locate the exact figure used for probate, and identify whether it came from a formal written valuation or an informal estimate, before you do anything else.
If no formal valuation exists and the property has not yet been sold, consider obtaining a retrospective professional opinion of value as at the date of death, since this is easier to support with contemporaneous evidence the sooner it is done.
Keep every piece of evidence relating to the property's condition and value at death, including photographs, agent correspondence and any survey, in case the figure is questioned later.
If you are close to exchanging or completing a sale, calculate the likely gain now using the method above, so there are no surprises about the 60 day reporting and payment deadline once completion happens.
If the sale price is significantly different from the probate value and the sale falls within three years of death, check whether the loss-on-sale-of-land relief could apply before assuming the original figure is fixed.
If the probate value was never formally established, if a Valuation Office Agency referral is already underway, or if the estate involves multiple beneficiaries with different tax positions, this stops being something you can safely work through with a single calculation. A tax adviser who deals with estate disposals regularly will look at the full picture, including whether it is worth revisiting the original valuation at all, before you commit to a sale price or a reporting figure.
Key points to take away
● Your Capital Gains Tax base cost for an inherited property is its market value at the date of death, not what your parents originally paid.
● Excepted estates rarely have their property value formally checked by HMRC at the time, which places the burden of evidence on you if a sale later attracts attention.
● A Valuation Office Agency revision to the date of death value increases both the potential Inheritance Tax due and your Capital Gains Tax base cost, so the effect is not one-sided.
● The loss-on-sale-of-land relief requires the sale itself within three years of death, not four, even though the claim deadline runs longer.
● The 60 day reporting and payment deadline for UK residential property applies regardless of whether you also complete a Self Assessment return.
FAQs
What is the probate value of an inherited property?
It is the market value of the property on the date the person died, as declared for probate or confirmation purposes. For Capital Gains Tax, this figure becomes your acquisition cost, so any growth in value from that point to your eventual sale is what gets taxed.
Do I pay Capital Gains Tax on the whole value of the house, or just the increase since death?
Only the increase. Your gain is the sale price minus the probate value, minus allowable selling costs and qualifying improvements, minus your annual exempt amount of £3,000 for 2026/27.
What if the estate never got a formal valuation, just an estate agent's estimate?
The estimate can still stand as your probate value, but it may be harder to defend if HMRC later questions it. Obtaining a proper written valuation, even retrospectively, and keeping supporting evidence strengthens your position considerably.
Can HMRC challenge the probate value years after the event?
Yes. HMRC can refer a property valuation to the Valuation Office Agency, particularly where a subsequent sale price differs significantly from the declared date of death value. This can happen well after the original probate application was made.
What happens if I sell the inherited property for much more than the probate value soon after death?
A large, quick increase in value is one of the more common triggers for HMRC to query the original probate figure. If the value is revised upward, you may owe additional Inheritance Tax, but your Capital Gains Tax base cost also rises, which usually reduces the eventual gain.
What happens if I sell for less than the probate value?
You may have an allowable capital loss, which can be set against other gains in the same tax year or carried forward. Where the sale happens within three years of death, a separate relief may also allow the sale price to replace the probate value for Inheritance Tax purposes.
Does moving into the inherited property before selling change the Capital Gains Tax position?
It can, because living in a property as your main home can bring some or all of the gain within relief. This depends on the specific facts of your occupation and is a separate area from the base cost question covered here.
Do I need to report and pay Capital Gains Tax even if I already file a Self Assessment return?
Yes. Capital Gains Tax on a UK residential property disposal must be reported and paid within 60 days of completion through HMRC's online property account, in addition to being included on your Self Assessment return if you file one.
What if the property was inherited jointly with my siblings?
Each beneficiary is assessed individually on their own share of the gain or loss and has their own annual exempt amount. Your tax position can therefore differ from a sibling's even though you inherited the same property together.
About the Author
Maz Zaheer, AFA, MAAT, MBA, is the CEO and Chief Accountant of MTA and Total Tax Accountants, two premier UK tax advisory firms. With over 15 years of expertise in UK taxation, Maz provides authoritative guidance to individuals, SMEs, and corporations on complex tax issues. As a Tax Accountant and an accomplished tax writer, he is renowned for breaking down intricate tax concepts into clear, accessible content. His insights equip UK taxpayers with the knowledge and confidence to manage their financial obligations effectively.
Disclaimer:
This article explains the general position for the 2026/27 tax year and is accurate at the date of publication. Tax outcomes depend on individual circumstances, and rules change. It is not advice for your situation. For guidance on your own position, speak to a qualified accountant or tax adviser. My Tax Accountant accepts no liability for action taken solely on the basis of this article.
