Explaining all things Capital Gains Tax, including whether you have to pay Capital Gains Tax on an inherited property when selling...

Losing a loved one is stressful enough without having to think about dealing with the property you have inherited, trying to sell it, Capital Gains Tax, inheritance tax and so much more…

But do you have to pay Capital Gains Tax on inherited property when selling? What actually is Capital Gains Tax and how does it differ from inheritance tax?

We’re going to answer these questions for you, as long as how much Capital Gains Tax you may have to pay and the best ways to sell an inherited property.

If you’re looking to find an answer quickly, use the menu below to guide you:
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What is Capital Gains Tax?

Capital Gains Tax, or CGT for short, is a tax that must be paid on any profit made when you sell an asset that has increased in value. For example, property, stocks and other high-value assets will be susceptible to CGT.

This isn’t to say, though, that all of your profit will be taxed, with Capital Gains Tax only applying to a part of your profits.

Each year everyone, including children, gets an Annual Exempt Amount, which is an allowance where any amount under this won’t be taxed. This is currently £12,300, or £6,150 for trusts.

You’ll be glad to know, however, that for most homeowners, you won’t have to pay CGT on the sale of your home, as you’re only liable to pay it on a property that isn’t classed as your primary place of residence.

This is where Capital Gains Tax on inherited property comes in – as an inherited property won’t be your primary residence, once you have gone through probate and it comes to selling, you will have to pay CGT on the profit.

It’s not only inherited property that will class as a second home and will be susceptible to CGT, any Buy to Let portfolios or English holiday homes will also be included.

Capital Gains Tax isn’t a ‘one size fits all’ tax, where everyone pays the same amount. There are a few varying factors that will affect the amount of tax you pay:

  • The value of the asset being sold

  • The type of asset with residential property susceptible to more CGT compared to other developments

  • How long you’ve owned the asset for

  • Your personal tax situation with higher rate taxpayers paying a larger amount of CGT

If you’re unsure how much CGT you will be susceptible to, a Capital Gains Tax calculator will be a good place to get an idea.

Do I have to pay Capital Gains Tax on inherited property when selling?

Yes, in short, you will have to pay Capital Gains Tax on inherited property when it comes to selling.

This is because an inherited property won’t be your primary residence, and by the time you have got through probate, got the property on the open market and FINALLY got a sale, the value of the property will have increased in value.

You can make deductions from the amount of Capital Gains Tax on an inherited property you will have to pay. For example:

  • Estate agent’s fees

  • Solicitor's fees

  • Advertising costs for finding a buyer

  • Costs of any improvement work (if you’ve added an extension for example. Maintenance costs, such as decorating, don’t count here)

  • Auctioneer's fees (if you sell through auction)

  • Costs of a surveyor

Exactly how much CGT you will have to pay will depend upon the profit made, how much you earn and what deductions need to be made from the total gain.

If you’re looking to sell your inherited property and don’t know how much CGT to expect to pay, the next section will be of great use to you!

Want to sell your inherited property FAST?

We can help with our fast cash buying service.

How much Capital Gains Tax will I have to pay?

In order to work out how much capital gains tax on inherited property you will be susceptible to, there are a few steps in the process. We will help guide you through each stage below:

Step 1

Step 1 consists of you working out your total gain or profit. This will be the value of the sold property, minus its original value and all costs involved.

So, for example, you sold the inherited property for £200,000 and it was worth £100,000 when you inherited it.

You spent £2,000 on estate agent fees and £2,000 solicitors’ fees (just an example, don’t quote us on these fees!)

You would then do this calculation:

200,000 - 100,000 - 2000-2000 = £96,000

(sold price) - (original price) - (both fees) = (total gain)

This would mean your total gain on the inherited property would be £96,000.

Step 2

The next step is looking at your CGT allowances and deductions for the year. As we mentioned earlier, the current Annual Exempt Amount is £12,300.

If you haven’t used this yet in the year, then you will have £12,300 of your profit exempt.

Step 3

Now you work out your taxable gain, which will just be your total gain minus the Annual Exempt Amount.

In this example, you would do £96,000 - £12,300 = £83,700

Step 4

Finally, you will work out the total amount of CGT payable and this will be based on your Income Tax bands. The current Income Tax bands are as follows:

  • Up to £12,570 = tax rate is 0%

  • £12,571 to £50,270 = tax rate is 20%

  • £50,271 to £150,000 = tax rate is 40%

  • Over £150,000 = 45%

Back to our example – let’s say you earn £20,000. You will need to calculate how much you have left after taking off your personal tax allowance.

This will be 20,000 (your income) minus 12,570 (personal tax allowance) = £7430

You will then need to minus this off £37,700 (the basic rate tax band) to see how much capital gains you will need to multiply by the basic rate of 18%. Anything above £37,700 will be taxed at 28%.

£37,700 – 7430 = £30,270 to be charged at the basic rate of 18%. The rest of the gain (£53,430) will be charged at a higher tax rate of 28%.

(We know this sounds confusing but we’re near the end, don’t worry!)

£30,270 multiplied by 18% tax rate = £5448.60

£53,430 multiplied by 28% tax rate = £14,960.40

Total tax to pay = £20,409

We know this is a large amount of your profit getting taken away from you, but if you read ahead to the end, we have information on how to minimise the amount of Capital Gains Tax on an inherited property you have to pay when selling…

Difference between inheritance tax and Capital Gains Tax on inherited property

So, you may be thinking, when you’ve inherited a property, you’ve already had to pay tax so why are you now having to pay CGT?

Well, when you inherit a property, you have to pay inheritance tax, which is why people can get confused about why they have to pay CGT too, but they are two different taxes!

Inheritance tax is paid on the value of the deceased estate over £325,000 at a rate of 40%. The estate involved property, savings, shares and any other assets.

The key difference between inheritance tax and CGT is that inheritance tax you have to pay just from inheriting an estate, whereas CGT you will only pay it if you choose to sell the property.

You will have to pay inheritance tax within 6 months of a person’s death and will be arranged by the executor of the will. The assets from the estate will not be released until you pay the tax.

You will also start to be charged interest on the amount of tax due if you don’t pay within 6 months of the person’s death.

Capital Gains Tax, however, will only be paid once you sell the property and will only be paid on the profit you make. As house prices generally tend to go up constantly, by the time you’ve been through probate, got the property on the market and sold, you will have made a profit and therefore will have a hefty tax to pay.

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Inherited a house and want to sell it? Here’s how!

When you’ve inherited a house and want to sell it, there are many different ways in which you can do so; with an estate agent; through auction and to a cash buyer.

Ideally, when selling an inherited property you will want to get the fastest sale possible, to try to limit the increase in the property’s value to reduce the amount of CGT you will have to pay.

Estate Agent

The first method you may think of when it comes to selling a property is with an estate agent on the open market. You will need to speak to a few different estate agents and explain that the property is inherited to see whose services will be more in line with what you need.

Once you’ve chosen your estate agent, they will value the property for you, get photos and a floorplan done and then put it onto the open market. From then, you will have to host viewings until you find yourself a buyer.

Whilst selling your house on the open market might be the most ‘traditional’ way of selling, this doesn’t necessarily mean it’s the best.

For example, estate agents tend to overvalue properties quite significantly so whilst you may initially look like you’re making a larger profit, you’re actually just meaning you will have to pay a larger amount of CGT.

Also, selling on the open market with an estate agent isn’t a quick sale and could lead to your property being on the market for months, sometimes even over a year, meaning there’s a higher chance the property will increase in value, meaning more profit and more CGT.

As a result of this, selling through the open market may not be the best way to sell and minimise the Capital Gains Tax on inherited property.


Another option when it comes to selling inherited property is selling through auction. Auction may be better suited than selling through the open market as buyers tend to look to pick properties up at a discount of the market value, meaning you may make less of a profit and will therefore have less CGT to pay.

The buyers at auction will all have their finances in place and will be ready to exchange contracts and put down a deposit when the hammer comes down on a deal. After auction, the buyer then has 20 to 28 days to complete the sale, therefore meaning it should be quicker than on the open market.

However, at auction there are no guarantees that your property will sell as the reserve price you set may end up not being met. You will also have to hold several open days for potential buyers to inspect the property, which may be difficult for you with the house acting as a reminder of the person who has passed.

Also, even though auction may be a faster method of sale compared to the open market, it’s still not the fastest method, with you potentially having to wait months before your property is approved for auction and then you will have to wait for a slot to become available.

You will also have to pay marketing costs, auctioneer’s commission fee, room hire and legal fees, meaning you could end up paying for these out of your own pocket.

Cash buyer

The final option for selling your property is to sell to a cash house buyer.

A cash buyer doesn’t require any kind of external funding from a lender, meaning they can buy fast, and they look to pick properties up at a discount, meaning you may make less profit and therefore have less CGT to pay.

Also, selling to a cash house buyer, whether it’s an independent investor or a company, like ourselves, there will be less paperwork involved – something we’re sure you’re pleased to hear after going through probate.

In fact, if you sell to us as your cash buyer, we will handle the whole process and all the paperwork for you from start to finish, leaving you only having to give us a signature.

On top of this, we only require one quick viewing of your property, to check our cash offer is accurate, and we can buy the property in a fast timescale of your choice – anything to make a difficult process easier for you.

As a result of our fast-purchasing times, your property won’t have time to increase in value which would leave you with large amounts of Capital Gains Tax to pay.

There’s no need to worry about having any fees to pay when selling to us, as we will cover them all for you, including the legal ones! Yes, that does mean you get our FULL offer in CASH in your bank!

We’re also members of The Property Ombudsman and the National Association of Property Buyers and we’re rated ‘excellent’ on Trustpilot with over 1,000 reviews, showing we’re a cash buyer you can trust.

To add to this, we also have over 50 years of combined experience, so you could say we’re quite the experts on Capital Gains Tax on inherited property.

We know what it’s like to sell a property and how stressful it can be, without the added stress of probate and losing a loved one, so we will always be happy to listen to your worries and reassure you every step of the way.

Give us a call or fill in our online form to receive a no-obligation cash offer for us to buy your property ASAP to help avoid Capital Gains Tax on inherited property…

Want to sell your inherited property FAST?

We can help with our fast cash buying service.

Tom Condon

Tom Condon, one of our content writers, has fascinating expertise in sustainability in the property industry. Tom thoroughly understands the market and has experience in both residential and commercial property. He enjoys attending conferences and staying current with the most recent property trends.