Capital Gains Tax When Someone Dies

Introduction

When someone dies, their assets generally receive an 'uplift' in value for Capital Gains Tax purposes, meaning no CGT is charged on gains made during the deceased person's lifetime. However, CGT may apply to gains made during the administration of the estate, and beneficiaries need to understand their new 'base cost' when they eventually sell inherited assets.

No Capital Gains Tax on death itself

Death is not treated as a disposal for Capital Gains Tax purposes. This means that any gain the deceased person made on their assets during their lifetime is not subject to CGT when they die. The assets pass to the personal representatives (the executors named in the will, or administrators if there's no will) without triggering a CGT charge.

Personal representatives and their responsibilities

Personal representatives are the people legally responsible for dealing with the deceased's estate. Their role is to gather the assets, pay any debts and taxes, and distribute what remains to the beneficiaries.

For CGT purposes, personal representatives are treated as a single body, even if there are several executors or administrators. They have their own CGT allowance during the administration period and are responsible for any CGT arising on disposals they make whilst administering the estate.

The administration period

The administration period begins on the date of death and continues until the estate is fully administered – when all assets have been collected, debts paid, and the remaining assets are ready to pass to beneficiaries.

During this period, personal representatives are deemed to acquire the deceased's assets at their market value on the date of death. This is known as the 'probate value' and becomes the base cost for calculating any gains if the personal representatives sell assets during administration.

If personal representatives dispose of assets during the administration period and make a gain, they may need to pay CGT. They have their own annual exempt amount (the tax-free allowance) which is the same as an individual's allowance in the tax year of death and the following two tax years. After that, the annual exempt amount is reduced.

Legatees: those who inherit specific assets

A legatee is someone who inherits a specific asset or assets from the estate – for example, a particular property or a collection of shares.

When a legatee receives their inherited asset from the personal representatives, this transfer is not a disposal for CGT purposes. No CGT is charged at the point of inheritance.

The legatee is treated as having acquired the asset at the same value the personal representatives acquired it – usually the market value at the date of death. This becomes the legatee's base cost. When the legatee eventually sells the asset, they calculate their CGT liability using this base cost, not what the deceased originally paid for it.

This 'uplift' in base cost can significantly reduce or eliminate CGT for beneficiaries. For example, if the deceased bought shares for £10,000 which were worth £100,000 at death, and the beneficiary later sells them for £105,000, the beneficiary only pays CGT on the £5,000 gain (subject to their annual exempt amount), not on the £95,000 gain made during the deceased's lifetime.

Residuary beneficiaries and the residue of the estate

The residue of an estate is what remains after all specific gifts have been distributed, debts paid, and administration expenses settled. Beneficiaries who inherit a share of the residue are called residuary beneficiaries.

The position for residuary beneficiaries is more complex than for legatees. Assets forming part of the residue remain in the hands of the personal representatives until the estate is fully administered. When personal representatives eventually transfer residue assets to residuary beneficiaries, this is not treated as a disposal for CGT purposes, and the beneficiaries acquire the assets at their market value at the date of death (uplifted if the value has increased during administration in certain circumstances).

Intestacy

Intestacy occurs when someone dies without leaving a valid will. In these cases, administrators (rather than executors) are appointed to deal with the estate, and the estate is distributed according to the intestacy rules.

For CGT purposes, the treatment is the same whether someone dies with a will or without one. Assets are still acquired by the administrators at market value on the date of death, and the same rules apply to disposals during administration and transfers to beneficiaries.

CGT rates and allowances in 2025/26

When personal representatives or beneficiaries dispose of inherited assets and make a gain, CGT is charged at the rates applicable in the tax year of disposal. In 2025/26, CGT rates depend on the type of asset and the taxpayer's income tax position, but personal representatives pay CGT at different rates – currently 20% for most assets and 24% for residential property that doesn't qualify for Private Residence Relief.

Beneficiaries pay CGT at their individual rates when they later sell inherited assets, and they can use their own annual exempt amount to reduce or eliminate the tax charge.

Record keeping

Personal representatives should maintain careful records of asset values at the date of death, as these figures become the base cost for both the estate and beneficiaries. These probate values are usually established during the Inheritance Tax process and should be retained for future CGT calculations.

Beneficiaries should obtain written confirmation of the market value at death for any assets they inherit, as they'll need this figure when calculating their own CGT liability on a future disposal.

Sources

• Death, personal representatives and legatees HS282 Self Assessment helpsheet

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.