When someone dies owning a property, one of three things typically happens: the property passes directly to a surviving spouse, it is transferred to beneficiaries, or it is sold during estate administration to fund legacies or estate expenses. The CGT rules for each scenario are different — and executors who get them wrong can face unexpected liabilities.
The death itself: CGT uplift, no disposal
The death of a property owner is not a CGT disposal. The property passes to the estate at the market value at the date of death (the probate value). Any gain accrued during the deceased's lifetime is not charged to CGT. This is the CGT "uplift on death" — it resets the base cost to current market value and wipes out the accumulated gain.
The probate value becomes the base cost for any future sale — whether sold by the executors during administration or by beneficiaries who inherit the property.
Selling during estate administration: executors as taxpayers
If the executors sell a property during the administration period (the period between the date of death and the final distribution of the estate), any gain above the probate value falls into the estate's CGT liability — not the beneficiaries'.
The estate has its own Annual Exempt Amount for CGT purposes. For the tax year of death and the two following tax years, the estate's exempt amount is £3,000 per year — the same as an individual. After those three tax years, no exempt amount applies to the estate.
CGT rates for estates are the same as for individuals: 18% (if the gain falls within the basic rate band of the estate's total income) or 24% for the remainder. In practice, many estates have little or no income, so the gain often starts at 18%.
The 60-day return: does it apply to executors?
Yes — the 60-day CGT reporting requirement applies to executors selling UK residential property during the administration of an estate, in the same way as it applies to individual sellers.
If the estate (through its executors) sells a property and a CGT gain arises above the estate's annual exempt amount, the 60-day return must be filed and the tax paid within 60 days of completion.
The executors need to register with HMRC for CGT purposes (via the UK Property Reporting Service) before they can file. The estate will need its own Unique Taxpayer Reference (UTR) or must be registered as a trust and estate with HMRC.
When is there no CGT to report?
If the property is sold within the estate's annual exempt amount (i.e., the gain above probate value is £3,000 or less), no CGT is due and no 60-day return is required. In a rising property market, however, a property that sat in probate for months before sale may well have appreciated above probate value.
If the property is transferred to a beneficiary rather than sold, no CGT arises at the point of transfer. The beneficiary inherits the property at probate value and their CGT liability only arises when they sell.
The interaction with Inheritance Tax
The probate value matters twice: once for Inheritance Tax (IHT) and once as the CGT base cost. Setting the probate value too low reduces the IHT exposure but also reduces the base cost, increasing the potential CGT gain if the property later sells above that value. Setting it too high increases IHT but reduces future CGT.
In most cases the probate value must reflect the true open market value — it is not something the estate can engineer. But understanding the interaction helps executors and beneficiaries plan ahead.
Practical steps for executors
- Obtain a professional valuation of the property at the date of death — this becomes the probate value and the CGT base cost
- Keep records of any estate expenses incurred in relation to the property (insurance, maintenance, repairs during the administration period — these do not improve the base cost but may be deductible against rental income if the property is let during the administration period)
- If the property is sold, note the completion date and count 60 days forward
- Register the estate with HMRC for CGT purposes before attempting to file
- Consider whether the gain falls within the estate's annual exempt amount
Managing CGT during estate administration alongside probate, IHT returns, and beneficiary distributions is complex. A Chartered Accountant/Chartered Tax Advisor can handle the CGT return and advise on the interaction with the broader estate position.