Yes, you can pay CGT if you give an inherited property away. HMRC treats a gift to anyone other than your spouse, civil partner or a charity as a sale at market value, so tax is due on any rise in value since the probate valuation, even though you receive no money. The exception is a deed of variation made within two years of the death, which redirects the inheritance as if the person who died had left it to the new owner.
Many people give an inherited property away to children or siblings to help them onto the ladder or to plan for Inheritance Tax. Doing it the wrong way can create a CGT bill payable within 60 days and still leave the property in your estate. For the official rules, see GOV.UK’s guidance on gifts and Capital Gains Tax.
This guide explains when CGT applies if you give an inherited property away, how to work out the gain, the Inheritance Tax 7-year rule, a worked example and the ways to reduce or avoid the bill.
Do You Pay CGT If You Give an Inherited Property Away?
Inheriting a property does not trigger CGT. Giving it away later usually does, because a gift is a disposal. The gain is the market value on the date of the gift minus the probate value and any allowable costs.
How the gift is taxed depends on who receives it:
| Who receives the property | CGT position |
|---|---|
| Your spouse or civil partner (living together) | No CGT. They take over your probate value as their base cost |
| A registered charity | No CGT |
| Children, siblings or anyone else | Treated as a sale at market value. CGT due on any gain |
| Redirected by deed of variation within 2 years of death | No CGT disposal by you, if the deed includes the right statement |
| Into a discretionary trust | Disposal at market value, but holdover relief may defer the gain |
Our guides to gifting property to family and CGT on gifted property explain the general rules for any home or rental.
How the Gain Is Worked Out
- Market value at the date of the gift. Get a RICS valuation, because HMRC can challenge a low figure.
- Less your base cost. This is the probate value at the date of death. See probate value and CGT.
- Less allowable costs. Legal fees for the transfer, valuation fees and the cost of any improvements you made.
- Less reliefs. If the property was your main home while you owned it, Private Residence Relief can cover some or all of the gain.
- Less your £3,000 annual exempt amount, then tax the rest at 18% within your unused basic rate band and 24% above it.
If you give an inherited property away soon after the death, its value is often close to the probate value, so the gain may be small. The longer you hold it first, the bigger the potential bill.
Worked Example: Gifting an Inherited House to a Daughter
Mark inherited his aunt’s house in 2024 at a probate value of £200,000. In the 2026/27 tax year he gives it to his daughter when it is worth £230,000, paying £1,500 in legal and valuation fees. Mark is a higher rate taxpayer and has never lived there.
| Step | Amount |
|---|---|
| Market value at gift | £230,000 |
| Less probate value | (£200,000) |
| Less legal and valuation fees | (£1,500) |
| Gain | £28,500 |
| Less annual exempt amount | (£3,000) |
| Taxable gain | £25,500 |
| CGT at 24% | £6,120 |
Mark must report the gift and pay £6,120 within 60 days of the transfer, even though he has received no cash. His daughter’s base cost for any future sale is £230,000. If Mark had redirected the property by deed of variation within two years of his aunt’s death, there would have been no CGT for him to pay.
Deed of Variation: Giving It Away Within Two Years
A deed of variation lets a beneficiary redirect all or part of an inheritance within two years of the death. If the deed includes a statement that it should apply for CGT, the property is treated as if the person who died had left it directly to the new owner.
That means:
- No CGT disposal by you, so no 60-day return and no tax to pay.
- The new owner’s base cost is the probate value.
- A separate statement can apply it for Inheritance Tax too, so the gift is not a lifetime gift from you.
You cannot receive anything in return for the variation, and all the original beneficiaries affected must sign. Our guide to the Inheritance Tax and CGT rules on inherited assets covers how variations fit into wider planning.
Inheritance Tax and the 7-Year Rule
If you give an inherited property away to an individual after the two-year window, it is a potentially exempt transfer for Inheritance Tax. If you survive seven years, it falls outside your estate. If you die within seven years and your gifts exceed the £325,000 nil-rate band, taper relief reduces the tax on gifts made three to seven years before death. See GOV.UK’s rules on gifts and Inheritance Tax.
Two traps to watch:
- Gift with reservation of benefit. If you keep living in or using the property without paying a full market rent, it stays in your estate for Inheritance Tax.
- No CGT uplift on death for the recipient. A property you keep until death gets a fresh probate value. One you give away keeps the value at the date of the gift.
For transfers within families more generally, see our guide to transferring property to a family member.
Reporting the Gift to HMRC
If there is CGT to pay on UK residential property, you must report and pay within 60 days of the transfer completing, using a UK property account. You can report and pay Capital Gains Tax on GOV.UK. You also include the gift on your Self Assessment return if you file one.
Keep the probate valuation, the valuation at the date of the gift, the transfer documents and any deed of variation. Our guide on when you pay CGT after inheriting a property sets out the other key deadlines.
Not sure who to ask? Our guide to choosing a capital gains tax specialist explains what to look for and how we help clients online across the UK.
Frequently Asked Questions
Can I gift my inherited property to my children?
Yes. You can gift it at any time, but it is treated as a sale at market value for CGT. Tax is due on any rise in value since the probate valuation, and the gift may count towards your estate for Inheritance Tax if you die within seven years.
Do I pay capital gains tax if I give my house to my son?
You may. If it was your main home throughout, Private Residence Relief usually removes the gain. If it was a rental or second home, CGT is due on the gain between your base cost and its market value on the day of the gift.
How can I avoid capital gains tax when gifting an inherited property?
Use a deed of variation within two years of the death, give it to your spouse or civil partner, gift it soon after inheriting when the gain is small, or use Private Residence Relief if you lived there as your main home.
Can I sell my inherited house to a family member for £1?
You can, but HMRC will still tax the gain using the full market value, because a sale to a connected person at undervalue is treated as a disposal at market value. The difference may also count as a gift for Inheritance Tax.
What is the 7-year rule for gifting property?
If you survive seven years after the gift, it falls outside your estate for Inheritance Tax. The rule does not apply to CGT, which is due on the gift when you make it.
Who pays CGT on a gifted property, the giver or the receiver?
The person giving the property away pays the CGT. The person receiving it pays nothing at the time, but takes the market value at the date of the gift as their base cost for a future sale.
Conclusion
If you give an inherited property away, HMRC treats it as a sale at market value unless it goes to your spouse, civil partner or a charity. Tax is due on the growth since the probate valuation, within 60 days, even though no money changes hands.
The most tax-efficient route is often a deed of variation within two years of the death. After that, plan the timing, valuation and Inheritance Tax position before you transfer the deeds.
To check the CGT before you give an inherited property away, speak to our inheritance and CGT specialists. Call us on +44 (0)1204 859315 or send us your question for a free initial consultation and a fixed-fee quote within 24 hours.
