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Inherited capital gains tax in the UK

  • February 4, 2022
  • 4 min read
Inherited capital gains tax in the UK

Inherited capital gains tax is a tax on the appreciation of a capital asset. If you inherit the land, for example, it has gone up in value and this means you suddenly have to find the money to pay tax on that increase. A recent change in inheritance rules means that anything worth more than £1,000 will be taxed at 20% if owned by an individual or 35% if passed to a spouse or partner. 

Capital gains tax in the UK

If you’re an individual looking to buy an investment property, invest in a business, or even make a start-up in the UK then you might find yourself subject to capital gains tax. Capital gains tax is put in place to discourage people from making capital investments with their savings and to make it more difficult for entrepreneurs and investors who are taking calculated risks. The UK has long been a leading proponent of Inheritance Tax, which provides an incentive for wealth to remain within the family and be passed down from one generation to the next. However, the current system is now outdated, inefficient and has led to unintended consequences. In addition to this, changing demographics have meant that there are many more families in which inheritance is not possible because no children are being born.

How to avoid paying capital gains tax on inherited property

Capital gains tax is a tax on the profit gained from selling an asset, usually held for a certain period. In the UK, capital gains tax can be up to 28% on assets sold more than six years ago. However, you may be able to avoid paying capital gains tax on the inherited property if your parents/grandparents gave you the property before death and it was passed onto you because of inheritance rules. Inheriting property from a loved one is a bittersweet experience. You get to enjoy the legacy of a loved one and also be grateful for their support. But what about the tax that comes along with it? For many people, it may seem like an unfair situation, especially when it’s an inheritance tax bill that could be worth hundreds of pounds. As you’d expect, the government has put together some rules to lessen your burden and avoid paying such taxes.

What steps should be taken

Capital gains tax on assets that have been inherited is currently 45%. However, there is a chance to reduce or even abolish this estate tax at the end of 2018. To do so, a person must make sure they fully comply with all the requirements of the Inheritance (Provision for Family and Dependants) Act 1975. Capital gains tax is an income tax imposed on the profits arising from the disposal of an asset, such as shares in a company or property. It is intended to discourage the sheltering of income from taxes.

Examples of how to avoid capital gains tax

The Inherited Capital Gains Tax is an important topic for all UK residents concerned about their tax liability. This tax affects the value of buildings, land, shares, and other investments that are passed on from a deceased person to their heirs. If the heir fails to dispose of the investment within seven years then the capital gain made will be taxed at 10%. Capital gains tax is a tax on the profit made from selling an asset. In the UK, this is calculated as 20% of the profit made from selling an asset. This could include anything from shares to property, with higher rates for property investments.


An individual that inherits capital gains tax faces several complex rules to determine their liability for the tax. The UK has an “inherited capital gains tax” which is paid at the rate of 28%.