Selling Mum's House After Probate — The CGT Gain Above Probate Value
- MAZ
- 7 minutes ago
- 15 min read
Selling Mum's House After Probate: CGT on the Gain Above Probate Value
When you sell an inherited property for more than its probate value, Capital Gains Tax applies to the difference, at 18% if the gain falls within your basic rate band or 24% if it pushes you into higher rate territory. The CGT is calculated using the market value at the date of death as your base cost, not the original purchase price paid by the deceased. You must report the sale and pay any tax due within 60 days of completion. The annual exempt amount for 2026/27 is £3,000.
Those four sentences answer the most common query, but the details around them are where returns go wrong, penalties arise, and people pay more tax than they owe. The rest of this article works through those details carefully.
Why the Probate Value Matters So Much
When someone dies, their assets are revalued to market value at the date of death for CGT purposes. This is sometimes called the "CGT-free uplift" or "step-up in base cost." Any gain that accrued during the deceased's lifetime is effectively wiped clean. A property that your mother bought in 1988 for £60,000 and that was worth £380,000 when she died is not assessed for CGT on the £320,000 she made during her ownership. That gain simply goes untaxed for CGT purposes (it may have formed part of the Inheritance Tax calculation instead, which is a separate matter and the estate's liability, not yours).
Your starting point for CGT is the probate value: £380,000 in that example. If you then sell the property for £410,000, your gain is £30,000, not £350,000. That distinction is what makes the calculation so different from the one many people assume, and it is why using the wrong base cost is one of the most common, and most costly, errors I see on CGT returns for inherited property.
The date of death, not the date of probate
The base cost is fixed at the market value on the date of death, not the date the grant of probate was issued. These two dates can be months apart. Where an estate has taken a year or more to administer, by which time a solicitor has obtained a fresh valuation for practical purposes, there is a temptation to treat that later valuation as the relevant figure. It is not. If the valuation was obtained as at the date of death (as it should have been, to satisfy the probate process), that is the date and figure that governs your CGT position.
The probate value should be supported by a professional valuation, ideally from a RICS-qualified surveyor, dated as close to the date of death as possible. HMRC's District Valuer can and does challenge values submitted on the IHT400, particularly for residential property. If HMRC subsequently agrees a higher figure for IHT purposes after negotiation, that higher figure becomes the CGT base cost. If a lower value is agreed, the base cost falls accordingly. The IHT and CGT valuations are not independent of each other: they are locked together at death.
This creates a genuine tension. A higher probate value means more IHT potentially payable by the estate, but also a higher base cost that reduces the beneficiary's CGT exposure on a later sale. The right value is the correct market value at the date of death; attempts to pitch it low to reduce IHT at the expense of a larger future CGT bill are a false economy and a compliance risk.
How the CGT Calculation Works
The chargeable gain on a sale of inherited property is calculated as follows:
Sale proceeds (the price you actually received from the buyer) less Allowable selling costs (estate agent fees, solicitor's conveyancing fees on the sale, and any other disposal costs) less Base cost (the agreed probate value) less Enhancement expenditure (money spent on capital improvements since you inherited the property, not repairs or decoration, but works that added lasting value) equals Gross gain less Annual exempt amount (£3,000 for 2026/27) equals Taxable gain.
The taxable gain is then added to your other income for the tax year to determine the applicable rate. If it falls within your remaining basic rate band (income up to £50,270 for 2026/27), the CGT rate is 18%. Anything above that threshold is taxed at 24%.
A worked example
A property is inherited with a probate value of £340,000. Two years later it sells for £390,000. Selling costs are £5,000 estate agent fees and £2,000 solicitor fees. No improvement works were carried out.
Gross gain: £390,000 minus £340,000 minus £7,000 = £43,000 Annual exempt amount: £3,000 Taxable gain: £40,000
The beneficiary has employment income of £38,000. Her basic rate band is £50,270 minus £38,000 = £12,270 remaining. The first £12,270 of the taxable gain falls within the basic rate band and is taxed at 18% (£2,209). The remaining £27,730 is taxed at 24% (£6,655). Total CGT: £8,864.
If the beneficiary had a lower income, more of the gain would attract the 18% rate and the bill would be smaller. If she and a sibling had inherited the property jointly, the gain would be split 50:50, each with their own £3,000 annual exempt amount and their own income for band purposes, which can reduce the total tax significantly compared to one person selling on their own.
The 60-Day Rule: Reporting and Payment
For all UK residential property disposals where a CGT liability arises, you must both report the sale and pay the estimated tax owed within 60 days of the completion date, through HMRC's UK Property Reporting Service (an online portal, separate from Self Assessment).
The 60 days run from completion, not from exchange of contracts. On a sale completing on 15 May 2026, the deadline is 14 July 2026. Missing this date triggers an automatic £100 late filing penalty, with further penalties if the delay extends beyond 6 months and interest running on any unpaid tax from the 60-day point.
Solicitors completing a conveyancing transaction do not automatically notify HMRC or file the return on your behalf. The obligation sits with you (or your tax adviser). Some solicitors will remind their clients, some will not. A significant number of people I deal with on CGT matters have received the automatic penalty before they even knew a filing was required, because nothing in the conveyancing process told them there was a 60-day window.
There is one practical exception worth knowing: if the property was sold at or very close to the probate value, with no gain or a very small one that falls entirely within your annual exempt amount, you may still need to file a return through the HMRC property reporting service if your total disposal proceeds for the tax year exceed £50,000, even where no tax is actually due. The threshold is on proceeds, not on gains. The penalty for not filing applies regardless of whether any tax is payable.
The CGT reported and paid via the 60-day return is then included in your Self Assessment return for the same tax year, which reconciles the estimated payment against your actual liability once all income and other gains for the year are known.
What Happens If the Estate Sells Before Transferring to Beneficiaries
Personal representatives (the executors) dealing with the estate may need to sell the property during the administration period rather than transferring it to the beneficiaries first. Perhaps there is a mortgage to repay, or other estate debts, or the beneficiaries simply want the proceeds rather than the property itself.
In that case, the sale is treated as a disposal by the estate, not by the beneficiaries. The personal representatives pay CGT at 24% (the flat rate applicable to estates, with no basic rate band available). However, they are entitled to use the full annual exempt amount of £3,000 during the tax year of death and the two following tax years. After that period, no annual exempt amount is available to them.
This is a point that catches a surprising number of executors, including experienced solicitors and accountants who do not regularly deal with CGT. The personal representatives of an estate are taxpayers in their own right during the administration period, and gains realised by the estate on property sales during that time are reportable and taxable under the same 60-day rule that applies to individual disposals.
Private Residence Relief and Inherited Property
If the inherited property was the deceased's main home and you or a co-beneficiary move into it and genuinely use it as your own main residence before selling, you can claim Private Residence Relief (PRR) for the period of occupation.
PRR works on a time-apportionment basis. Only the gain attributable to the period since you inherited it is relevant (there is no gain attributable to the deceased's period of ownership, because of the base cost uplift at death). If you live in the property for the full period from inheritance to sale, the entire gain is covered by PRR and no CGT arises.
The final nine months of ownership are always treated as a period of main residence for PRR purposes, provided the property was at some point your only or main home. This means even if you move out nine months before you sell, that final period still qualifies. This is sometimes described as the "deemed occupation" period.
A common misunderstanding is that the deceased's occupation counts towards PRR for the beneficiary. It does not. PRR for the beneficiary runs only from the date of death onwards. The deceased's occupation only matters insofar as it might affect whether the estate itself can claim PRR if the property is sold during administration, which is a different and narrower question.
Letting relief, which used to be available for periods when a property had been let and was therefore not a main residence, was significantly restricted from April 2020. It is now only available where the owner was living in the property at the same time as the tenant, which does not apply to most standard single-property lettings. Assuming letting relief will reduce the bill on a property that was entirely let (with no co-occupation by the owner) is an error that still appears regularly on returns.
Joint Inheritances and Multiple Beneficiaries
Where a property is inherited by more than one beneficiary, each person's share is treated as a separate disposal when the property is sold. Each beneficiary:
● uses their own £3,000 annual exempt amount against their own share of the gain
● is assessed against their own income to determine the applicable CGT rate (18% or 24%)
● files their own 60-day return and pays their own CGT
For a property inherited equally by two adult children with different incomes, the benefit of splitting can be significant. One sibling who is a basic-rate taxpayer (income well below £50,270) may pay 18% on their entire share, while the other pays 24% on part of theirs. Both still use their own £3,000 exempt amount.
Where siblings are at odds about whether to sell, or to whom, one selling their share to the other at below market value does not reduce the CGT calculation. HMRC requires that disposals between connected persons (including close family) are calculated using market value regardless of the price actually paid. A sibling who transfers their share for £1 is still assessed on the gain as if market value had been received.
Scotland and Wales: Any Differences?
CGT is a UK-wide reserved tax, so the rates, annual exempt amount, 60-day rule, and base cost rules are identical across England, Scotland, Wales, and Northern Ireland. There is no Scottish or Welsh CGT regime.
What does differ is the probate process. In Scotland, the equivalent of probate is Confirmation, granted by the Sheriff Court rather than the Probate Registry. The underlying principle for CGT is the same: the market value of the property at the date of death, supported by a professional valuation, becomes the base cost. But the Scottish legal terminology and process are different, and any references to "grant of probate" in English guidance should be understood as applying to Confirmation in Scotland. The same practical points about date of death versus date of Confirmation apply north of the border.
Welsh property transactions now record separately in HM Land Registry's Wales data, and Land Transaction Tax (administered by the Welsh Revenue Authority) replaced SDLT for Welsh land transactions in April 2018. Neither change affects CGT, which remains a HMRC matter.
One point specific to Scottish taxpayers: CGT on residential property is taxed at the UK-wide rates (18%/24%) rather than the Scottish income tax rates, which are higher for many Scottish taxpayers at the higher and intermediate band levels. The interaction between income and the CGT rate band is calculated using the UK-wide income tax thresholds (£50,270 for the higher rate), not the Scottish higher rate threshold (£43,662 in 2026/27). A Scottish higher-rate taxpayer who earns between £43,662 and £50,270 pays 42% Scottish income tax on employment income in that range, but uses the UK-wide £50,270 threshold when working out how much of a capital gain falls within the basic rate band for CGT purposes.
What to Do Before You Sell
Before instructing estate agents or accepting an offer, it is worth checking a few things that affect both the tax position and the smoothness of the sale itself.
Confirm the probate value. Obtain and file the RICS valuation certificate. If one was not obtained at the time of death and the estate was submitted to HMRC using an estimated figure, the gap between the estimated and actual market value matters for CGT purposes.
Check whether any Enhancement Expenditure has been incurred. If work has been done to the property since the date of death, assess whether it qualifies as capital improvement (increasing base cost) or repairs and maintenance (not deductible for CGT). Replacing a kitchen like-for-like is generally a repair. Adding an extension is generally improvement. The distinction has a direct effect on the size of the taxable gain.
Consider the timing of the sale relative to the tax year. If the gain is large enough that selling slightly later would push you into a lower-income year (for instance, if you are about to retire or go part-time), the CGT rate may be lower in that later year because more of the gain falls within the basic rate band. Whether this is feasible depends on the property market and the estate's circumstances, but it is worth considering before exchange of contracts.
If the property is inherited jointly, consider whether transferring a share to a spouse or civil partner before sale is appropriate. Transfers between spouses are on a no-gain-no-loss basis, so there is no immediate CGT on the transfer itself. This allows the couple to use two annual exempt amounts (£6,000 combined) and potentially place part of the gain in a lower-rate band if one partner has lower income. The transfer must be genuine; both names must appear on the conveyance at the time of sale.
Key Takeaways
CGT on an inherited property is calculated using the probate value (market value at date of death) as the base cost, not the deceased's original purchase price. The taxable gain is any increase in value from that point to sale, after deducting selling costs, improvement expenditure, and the £3,000 annual exempt amount (2026/27). CGT rates are 18% for gains within the basic rate band and 24% above it. The 60-day reporting and payment deadline runs from completion, not exchange, and the penalty for missing it applies regardless of whether any tax is due. Where multiple beneficiaries are involved, each files separately and uses their own allowance and income position. The date of death (not date of probate) sets the base cost, and that figure should be supported by a professional valuation.
Q1: What if the house was sold quickly after probate but still showed a gain above the probate value, does timing matter for CGT?
Well, it's worth noting that even a swift sale can trigger CGT if market conditions pushed the price up since the date of death. In my experience with clients in the South East, where prices can fluctuate fast, the key is getting a robust probate valuation from a qualified surveyor that reflects the open market at death. One freelancer client in Manchester sold Mum's terrace within six months and faced a modest gain; by claiming allowable costs like minor repairs and the annual exempt amount, they kept the bill low. Always double-check with your solicitor whether appropriation to beneficiaries before sale might shift things favourably.
Q2: As a self-employed business owner inheriting Mum's house jointly with siblings, how do we handle the CGT gain if one of us wants to rent it out short-term?
In my practice, I've seen this trip up gig economy workers and sole traders more than most. The estate or beneficiaries pay CGT on the post-probate gain upon sale, but renting introduces income tax alongside any future CGT when sold. Consider a hypothetical: a Leeds-based consultant inherits a share and rents for a year, they'd report rental income separately, and only their portion of the gain applies when sold, using their own annual exemption. Document everything meticulously, as HMRC scrutinises mixed-use properties. Speaking to a tax adviser early can help explore whether transferring shares first minimises complications.
Q3: Can I claim private residence relief on Mum's house if I move in after probate to avoid CGT on the gain above probate value?
It's a common mix-up, but yes, you can potentially qualify if it becomes your main home. The relief covers periods of actual occupation, and you have two years from inheriting to nominate it as such to HMRC if you own multiple properties. I've advised high-earning clients in Birmingham who lived in the inherited home for 18 months before selling, it wiped out a significant chunk of the post-probate gain. Just remember, the clock starts from when you make it your residence, not the probate date. Keep utility bills and council tax records as evidence.
Q4: What happens with CGT if improvements were made to the house between probate and sale, does that reduce the taxable gain above probate value?
Absolutely, and this is where practical pitfalls often hide. Allowable enhancements like a new kitchen or extension (not routine maintenance) can be deducted from the gain. Picture a self-employed graphic designer in Edinburgh who added a home office after inheriting: those costs, plus selling fees, trimmed their CGT liability nicely. In my 15+ years, clients who keep detailed invoices and receipts fare best during any HMRC review. It's not automatic, you must substantiate them.
Q5: For high-earners in the additional rate band, how does selling Mum's house after probate affect overall tax planning, especially with other investments?
High earners often face the 24% residential property CGT rate on gains above the basic rate threshold. In my experience, coordinating the sale with lower-income years or offsetting against losses from shares can make a real difference. Take a London-based director who had investment losses: using those against the house gain saved thousands. Always review your full tax position, the 60-day reporting deadline for property sales means planning ahead is essential to avoid rushed decisions.
Q6: If the probate valuation seems too low and the house sells much higher shortly after, can we challenge or adjust it for CGT purposes?
It's a tricky area I've navigated for several families. The probate value stands as the base cost, but if compelling evidence shows it didn't reflect true market value at death (e.g., overlooked development potential), you might discuss with HMRC. However, increasing it could affect any Inheritance Tax already settled. One client in Wales successfully provided additional comparable sales data post-probate. Proceed cautiously and with professional valuation support to avoid opening other queries.
Q7: As a PAYE employee living in Scotland, are there any regional differences when calculating CGT on the gain from selling an inherited English property?
Scottish taxpayers follow the same CGT rules and rates as the rest of the UK for property, but your income tax bands differ slightly, which can influence how much of the gain falls into higher CGT brackets. In practice, I've seen this catch out cross-border clients. A teacher from Glasgow selling Mum's Midlands flat needed to factor in their Scottish income when estimating the 18%/24% split. Use the UK-wide residential rates, but run the numbers carefully against your total income for accuracy.
Q8: What if multiple beneficiaries inherit Mum's house and one wants to buy out the others, how does that impact CGT on any gain above probate value?
This scenario requires careful handling to avoid unnecessary tax. The buy-out can be treated as a part disposal for CGT purposes for the sellers. I've guided business owners through this: suppose three siblings, one buys the shares, the departing ones calculate gain on their portion sold, using the probate value proportion. It keeps things cleaner than a full sale sometimes. Get agreement in writing and consider stamp duty implications for the buyer.
Q9: How do I ensure I don't miss the 60-day CGT reporting deadline when selling Mum's house as personal representatives of the estate?
Missing it is stressful but avoidable with good coordination. Personal representatives must report and pay any CGT on the estate's gain within 60 days of completion. In my experience, appointing a proactive accountant early prevents last-minute scrambles, especially with solicitors handling conveyancing. One family in the North East nearly overlooked it amid grief, setting calendar reminders tied to the sale contract helps. Keep records of all deductions ready.
Q10: For someone in the gig economy with irregular income, what practical steps minimise CGT surprises on the post-probate house sale gain?
Irregular earners benefit hugely from proactive forecasting. Set aside funds based on estimated gain (sale price minus probate value, costs, and exemption), and consider timing the sale around quieter tax years. I've worked with delivery drivers and freelancers who used the annual exempt amount wisely and offset small capital losses. Review all income sources together, as it affects the rate bands. A simple spreadsheet tracking costs from day one post-probate has saved clients significant headaches, and always confirm your specific situation, as individual circumstances vary.
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.
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