Inheritance Tax and Selling an Inherited House: What Beneficiaries Need to Know

The two taxes that matter

When a UK property is inherited and sold, two separate taxes can apply:

1. Inheritance Tax (IHT) — paid by the estate before the beneficiaries receive anything.
2. Capital Gains Tax (CGT) — paid by the beneficiary or executor on any rise in value between the date of death and the date of sale.

Inheritance Tax basics (2026)

• Nil-rate band: £325,000 per person
• Residence nil-rate band: additional £175,000 where the main home passes to direct descendants (children, grandchildren, stepchildren)
• Married couples / civil partners: unused allowances transfer, giving a combined threshold of up to £1 million
• Rate above the threshold: 40% (reduced to 36% if 10%+ of the net estate is left to charity)

The residence nil-rate band tapers away by £1 for every £2 of estate value above £2 million.

When IHT is due — and who pays

IHT must be paid within six months of the end of the month of death. Interest accrues after that.

The estate pays, not the beneficiaries. Executors can:

• Use the Direct Payment Scheme to pay IHT directly from the deceased's bank accounts
• Take out an executor's loan to pay IHT so probate can issue
• Pay IHT on the property in 10 annual instalments (interest applies)

Without IHT paid or arranged, HMRC will not release the grant of probate — so the property cannot legally be sold.

Capital Gains Tax after the sale

The base cost for CGT is the property's market value at the date of death, not the deceased's original purchase price. This "step up" is why an accurate date-of-death valuation matters.

• If the property is sold at or near the probate value, no CGT is due.
• If it rises in value between death and sale — for example, because the market moves or refurbishment adds value — CGT is due on the gain, after any allowable expenses (legal fees, agent fees, capital improvements).
• CGT rates on residential property in 2026: 18% for basic-rate taxpayers, 24% for higher-rate.
• The executors have the CGT annual allowance (£3,000) in the tax year of death and the two following tax years.

Practical advice

• Sell within 12 months of death where possible. This anchors the sale price close to the probate valuation and reduces CGT risk.
• Keep evidence of the probate valuation — three agent valuations or a RICS report is standard.
• Do not undervalue for probate to save IHT — HMRC's district valuer will challenge, and any later sale price close to the "real" figure will trigger interest and penalties.

When a cash sale helps the tax position

For executors, an evidenced, arm's-length sale within months of death is the cleanest way to close the estate. Quick Sales UK provides a written offer, evidenced comparables, and a completion date the executors can plan around — useful even if the offer is ultimately declined, because it forms part of the valuation evidence.

Related next steps

If the property you are dealing with is in South Wales, these pages may help: house buyers in Wales and we buy any house in Wales.