Tax Implications of Inheriting a Property

When someone inherits a property from a deceased estate (this person is known as a “beneficiary”), there may be some tax implications including the potential for a capital gains tax liability.

The amount of capital gains tax payable upon the sale of an inherited asset depends on several factors including:

  • When the original owner purchased it.
  • When the beneficiary inherited it.
  • When the beneficiary sells it

When an asset was originally purchased by the deceased before 20 September 1985 the cost of the asset for tax purposes is the value of the asset at the date of death.

For assets purchased after September 1985 the cost is the amount originally paid by the deceased.

For assets inherited after that date capital gains tax is payable on the excess of the selling proceeds over the cost.

The exception to this is where a principal place of residence is inherited. If the house meets all of the exemption conditions, then the former principal place of residence can be sold and no tax is payable on the gain provided the settlement takes place within two years of the deceased’s death.

As tax laws are constantly evolving and complex & each situation is unique, we suggest you contact us to discuss your specific situation and do not rely solely on this information.


Article Written by Callinda Beale.

Callinda is a member of the Institute of Chartered Accountants

and a Director of South East Accounting.