Do you pay capital gains tax on an inherited house?

Not on the inheritance itself. You may pay capital gains tax when you sell, on the increase in value between the probate value at the date of death and the sale price, after deducting selling costs and your annual exempt amount.

Is it inheritance tax or capital gains tax?

They are separate. Inheritance tax is assessed on the estate at the date of death and paid by the estate. Capital gains tax applies afterwards, to any gain made between that date-of-death value and the eventual sale price.

What if the house sells for less than the probate value?

Then there is no capital gain. Where the sale happens within four years of death and the price is lower than the probate value, executors can often claim inheritance tax loss relief so the estate is taxed on the real figure rather than the higher valuation.

How quickly do you have to report and pay?

A capital gains tax bill on UK residential property must be reported and paid within 60 days of completion, using HMRC's property account. That deadline is separate from your normal self assessment return.

Capital gains tax on inherited property

Name: The Quick House Buyers — London
Address: Level 6, Design Centre East, Chelsea Harbour, London, England, SW10 0XF, GB
Telephone: 020 3744 0249

Written and reviewed by Kris McClory, Head of PurchasesLast reviewed 6 August 2026

Inheriting a house does not trigger capital gains tax. Selling it can. The taxable gain is the sale price minus the probate value at the date of death, minus your selling costs and your annual exempt amount. Any bill on UK residential property has to be reported and paid within 60 days of completion.

Printed sold-price comparables spread across a desk with a pencil and ruler

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How the calculation works

Working out the taxable gain on an inherited house

Working out the taxable gain on an inherited house
Step	What goes in
Start with the sale price	What the buyer actually pays
Deduct the probate value	Open market value at the date of death
Deduct selling costs	Estate agent or auction fees, legal fees, some improvement costs
Deduct the annual exempt amount	Your unused allowance for the tax year
Apply the residential property rate	Depends on whether you are a basic or higher rate taxpayer

Rates and allowances change at each Budget, so check the current figures on GOV.UK or with an accountant before you commit to a number. The structure of the calculation does not change.

Why the probate valuation matters so much

The probate value is the baseline for everything that follows. Value the house too low to keep the inheritance tax figure down, and you hand yourself a bigger capital gain when it sells. Value it too high and the estate pays more inheritance tax than it needed to. A defensible open market valuation, evidenced with comparables, protects you in both directions.

Selling at a loss against the probate value

Plenty of inherited houses sell for less than the probate figure, especially ones that need work. There is no capital gain in that situation. Where the sale completes within four years of death, executors can usually claim inheritance tax loss relief so the estate is assessed on the price achieved rather than the earlier valuation. That is a claim worth raising with the estate's solicitor rather than leaving on the table.

Holding costs eat into the gain either way

An empty inherited house costs money every month it stands: unoccupied insurance, council tax once the exemption ends, standing charges, and repairs that get worse the longer nobody is in the building. Those are not deductible against your gain. Six months of drift can cost more than the difference between a slow open market sale and a fast one.

This page is general information, not tax advice. Get the numbers checked by an accountant before you file.

Common questions

Do you pay capital gains tax on an inherited house?: Not on the inheritance itself. You may pay capital gains tax when you sell, on the increase in value between the probate value at the date of death and the sale price, after deducting selling costs and your annual exempt amount.
Is it inheritance tax or capital gains tax?: They are separate. Inheritance tax is assessed on the estate at the date of death and paid by the estate. Capital gains tax applies afterwards, to any gain made between that date-of-death value and the eventual sale price.
What if the house sells for less than the probate value?: Then there is no capital gain. Where the sale happens within four years of death and the price is lower than the probate value, executors can often claim inheritance tax loss relief so the estate is taxed on the real figure rather than the higher valuation.
How quickly do you have to report and pay?: A capital gains tax bill on UK residential property must be reported and paid within 60 days of completion, using HMRC's property account. That deadline is separate from your normal self assessment return.