How to Avoid Capital Gains Tax on Inherited Property in the UK

Inheriting a property can feel like a financial blessing — but it may also come with tax implications that catch many people off guard. One of the most common concerns is:
“Do you pay capital gains tax on inherited property?”

The short answer is not when you inherit it — but you may pay Capital Gains Tax (CGT) if you decide to sell it later, and the value has increased since the date of inheritance.

For an in-depth guide on CGT, and not just on property, you can read this article from Wellers Accountants.

In this guide, we’ll explain exactly when CGT applies, how it’s calculated, and most importantly — how to avoid or minimise Capital Gains Tax on inherited property in the UK.

Do You Pay Capital Gains Tax on Inherited Property?

When someone dies and leaves you a property, you don’t pay CGT at the point of inheritance.

Instead, you inherit the property at its market value on the date of death — this is known as the “base cost”.

You only become liable for Capital Gains Tax if you sell the property in the future and make a profit above that base cost.

When Capital Gains Tax Applies

CGT is triggered when you sell, gift, or dispose of an asset and it has gained value.

Example:

You inherit a house valued at £250,000
You sell it three years later for £300,000
The “gain” is £50,000 (sale price minus base cost)

Depending on your circumstances, some or all of that gain may be taxable.

CGT Rates for Property:

18% or 28% depending on your income (basic or higher-rate taxpayer)
Everyone gets a CGT allowance — in 2025/26, it’s £3,000 per person (subject to change)

How to Avoid (or Reduce) Capital Gains Tax on Inherited Property

While you may not be able to avoid CGT entirely, there are legitimate ways to reduce or offset the tax:

1. Sell the Property Soon After Inheriting

If you plan to sell, doing so sooner rather than later can reduce your capital gains. The longer you hold the property, the more likely it is to appreciate — increasing your tax liability.

2. Use Your CGT Allowance

Each individual has an annual CGT exemption — currently £3,000. If you’re inheriting jointly (e.g. with siblings), you can each use your allowance against your share of the gain.

3. Deduct Costs to Reduce the Gain

You can reduce your gain by subtracting:

Solicitor or estate agent fees
Improvement costs (e.g. a new kitchen — but not general maintenance)
Valuation fees

Keep records of any improvements made to the property after you inherited it.

4. Transfer to a Spouse Before Selling

Spouses can transfer assets to each other tax-free. This allows you to double your CGT allowance and potentially benefit from a lower income tax rate.

5. Convert to a Buy-to-Let and Hold Long-Term

If you don’t need the funds right away, consider keeping the property as a rental investment. This gives you:

Time to plan your eventual sale
Regular rental income
The opportunity to sell in a low-income year, when you may pay less CGT

At Lifestyle Property Group, we often help clients turn inherited homes into income-producing assets that support long-term wealth building.

What If the Property Is Still in Probate?

CGT doesn’t apply while the property is in probate and legally part of the estate. Tax only becomes a concern once the property has been transferred to your name and you choose to sell it.

If you’re managing an estate, it’s essential to get a professional property valuation at the date of death — this will form the basis for calculating CGT later.

How Lifestyle Property Group Helps Inheritors Turn Property into Profit

At Lifestyle Property Group, we help property inheritors across the UK make smart, stress-free decisions. If you’re not sure what to do with a property you’ve inherited, we can help you: