If you sell an inherited property you have lived in as your main home, Private Residence Relief can wipe out some or all of the Capital Gains Tax. The gain is measured from the probate value, not what the person who died paid. Only the months you did not live there, apart from the final nine months, are taxed at 18% or 24% after your £3,000 annual exempt amount.
The catch is that relief only covers the time the property was really your home. Moving in for a few weeks before a sale, or keeping another home as your main residence, can leave most of the gain taxable. For the official starting point, see GOV.UK’s guidance on tax on property you inherit.
This guide explains how CGT works when you sell an inherited property you have lived in, how to split the gain between taxable and exempt months, a full worked example for 2026/27, and when you need to report the sale to HMRC within 60 days.
Do You Pay CGT on an Inherited Property You Have Lived In?
You do not pay Capital Gains Tax when you inherit a property. Any Inheritance Tax is dealt with by the estate before you receive it. CGT only arises when you later sell, gift or otherwise dispose of the property and it has grown in value since the date of death.
Whether the gain on an inherited property you have lived in is taxed depends on how you used it while you owned it:
- Your only or main home for the whole time you owned it: the gain is usually fully exempt under Private Residence Relief (PRR).
- Your home for part of the time: the gain is split, and only the months it was not your home are taxable.
- Never your home (left empty, let out or used as a second home): the whole gain above the probate value is taxable.
Our guide to what Private Residence Relief is explains the relief in full. The key point for beneficiaries is that your period of ownership starts on the date of death, so that is the date from which HMRC counts your months of occupation.
How the Gain Is Worked Out on an Inherited Property You Have Lived In
The calculation for an inherited property you have lived in has four steps.
- Find your base cost. This is the market value at the date of death, normally the figure agreed for probate. See what probate value is and why it matters for CGT.
- Work out the total gain. Sale price minus probate value, minus allowable costs such as estate agent and solicitor fees and the cost of capital improvements you made.
- Apply Private Residence Relief. Divide the months the property was your main home, plus the final nine months, by the total months you owned it. That share of the gain is exempt.
- Tax what is left. Deduct your £3,000 annual exempt amount and tax the rest at 18% within your unused basic rate band and 24% above it.
HMRC’s HS283 Private Residence Relief helpsheet sets out the same time-apportionment method.
Common Scenarios at a Glance
How much of the gain is taxed on an inherited property you have lived in depends on the timeline. These are the most common situations.
| How you used the inherited property | CGT position when you sell |
|---|---|
| Lived with the deceased and stayed on as your only home until sale | Usually fully exempt under PRR |
| Moved in soon after the death and lived there until sale | Mostly exempt; the gap before you moved in may be taxable |
| Lived there for a while, then moved out and sold within 9 months | Fully exempt, because the final 9 months are always covered |
| Lived there for a while, then let it out for years before selling | Partly taxable; letting months beyond the final 9 are taxed |
| Kept your own home and used the inherited one as a second home | Taxable unless you nominated it as your main residence in time |
| Inherited from your spouse or civil partner who lived there with you | Special rules can let you count your partner’s period of ownership |
Worked Example: Selling an Inherited Home After Living In It
Sarah’s mother died in January 2024 and left her the family home, valued for probate at £250,000. Sarah moved in during July 2024 and lived there as her only home until January 2026, when she moved in with her partner. She sold the house in October 2026 for £295,000 and paid £5,000 in agent and legal fees. Sarah is a basic rate taxpayer with £10,000 of her basic rate band unused.
| Step | Figure |
|---|---|
| Sale price | £295,000 |
| Less probate value | (£250,000) |
| Less selling costs | (£5,000) |
| Total gain | £40,000 |
| Months owned (January 2024 to October 2026) | 33 |
| Exempt months: 18 lived in + final 9 | 27 |
| Taxable share: £40,000 × 6/33 | £7,273 |
| Less annual exempt amount | (£3,000) |
| Taxable gain | £4,273 |
| CGT at 18% (within her basic rate band) | £769 |
Without Private Residence Relief, Sarah’s bill on the same sale would have been £8,280 (£10,000 at 18% and £27,000 at 24%), so living in the house saved her more than £7,500. Had she moved in straight after the death, the whole gain would have been exempt. You can test your own figures with our free CGT calculator, and our guide to how capital gains are calculated on inherited property covers more examples.
What Counts as “Living In” the Property?
There is no fixed minimum period before an inherited property you have lived in qualifies for relief. HMRC looks at the quality of your occupation, not just the length. Evidence that the property was really your home includes:
- Moving your belongings in and furnishing it as your home
- Registering on the electoral roll and with a GP at that address
- Updating your bank, employer, HMRC and DVLA records
- Paying council tax and utility bills in your name
- Not keeping another property available as your main home at the same time
Short stays to clear the house, decorate or prepare it for sale do not count. HMRC challenges claims where someone moves in briefly just before selling, and it can charge penalties and interest if relief was claimed wrongly.
If You Already Own a Home: The Two-Year Nomination
An inherited property you have lived in often means you have two homes at once. You can only have one main residence for PRR. Within two years of first having two residences, you can write to HMRC to nominate which one counts as your main home. GOV.UK explains this in its page on tax when you sell your home.
If you miss the window, HMRC decides based on the facts, which may not be the result you want. A nomination can be a powerful planning tool, but it must reflect a property you actually live in. Our page on capital gains tax on a second home covers how the nomination works when you keep both.
Reporting the Sale Within 60 Days
If any part of the gain is taxable, you must report the sale on a UK property return and pay the estimated tax within 60 days of completion. If the whole gain is covered by Private Residence Relief, no 60-day return is needed. You can report and pay Capital Gains Tax on GOV.UK, and our step-by-step guide shows how to report UK property CGT in 60 days.
Keep the probate valuation, completion statements, receipts for improvements and your evidence of living there for at least four years after the end of the tax year of sale.
Frequently Asked Questions
Do I need to pay capital gains tax on inherited property?
Not when you inherit it. You only pay CGT if you later sell or give it away for more than its probate value. If it was your only or main home for the whole time you owned it, Private Residence Relief usually makes the gain tax-free.
What is the 2 year rule for inherited property?
It usually refers to the two years you have to nominate your main residence with HMRC if inheriting leaves you with two homes. It is also the deadline for a deed of variation, which lets beneficiaries redirect an inheritance within two years of the death.
How are capital gains calculated on an inherited property?
Take the sale price, deduct the probate value and allowable selling and improvement costs, then apply any Private Residence Relief and the £3,000 annual exempt amount. The rest is taxed at 18% or 24% depending on your income.
How long do you have to live in a property to avoid capital gains tax in the UK?
There is no set minimum. Relief depends on the property genuinely being your home. Living there from the date of death until you sell, or selling within nine months of moving out, normally makes the whole gain exempt.
What is the 36-month rule for capital gains tax in the UK?
It was the old final period exemption. Since April 2020 the final period is nine months for most people. It stays at 36 months only if you are disabled or moving into long-term care and have no other relief-qualifying home.
Can I sell my main residence and move into my inherited home?
Yes. Your original home is normally exempt if it was your main residence throughout, and the inherited home qualifies for relief from the date it becomes your main home. Months before you moved in may be taxable when you later sell it.
Conclusion
Selling an inherited property you have lived in can be completely tax-free, but only for the months it was really your home. Start from the probate value, count your months of genuine occupation plus the final nine months, and keep evidence that you lived there.
If you have two homes, think about a main residence nomination within two years, and remember the 60-day deadline if any gain is taxable.
For a precise figure on the inherited property you have lived in, 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.
