Capital gains tax on disposal of a probate property

 If a property is sold at a higher value than it was valued at the date of death (the Probate value) then this could result in Capital Gains Tax (CGT) being payable. When dealing with an estate, the Personal Representatives are responsible for considering and settling any CGT due within 60 days of completion of the sale of a property.  
 
CGT is due on the difference between the Probate value and the sale value, less any deductible expenses, and less the estate's annual tax-free allowance. 
 
What are deductible expenses?
 
 You can deduct the following expenses from the potentially taxable value: 
• The costs of selling the property, including solicitors’ fees and estate agents’ fees. 
• The costs of improvement work, for example for an extension or a new kitchen.
 
However, you cannot deduct maintenance costs or mortgage interest from your tax bill. 
 
 What is the available allowance for an estate? 
 
Individuals and estates are entitled to an annual exemption for CGT purposes. Any gains above the annual exemption will be subject to tax at the relevant rate. 
 
• For tax year 2024/25, the annual exemption is £3,000. 
• From tax year 2025/26 this is expected to remain at £3,000.
 
The tax year runs from the 6th of April to the following 5th of April. The annual exemption is available for disposals in the same year as the death or the following 2 years. 
The rate of CGT for disposing of a residential property in an estate is charged at 24%. However, this can be mitigated through appropriation. 
 
Different rules/rates may apply if the property is also your residence, or you are dependant relative of the deceased.
 
What is a Deed of Appropriation?
 
If an estate asset is expected to sell for a substantial gain, it is sometimes more tax-efficient to sell the asset on behalf of the beneficiaries, rather than on behalf of the estate. This process is known as appropriation. 

This is particularly beneficial if: 
 
• The beneficiaries are basic rate taxpayers, as the tax payable would be at a lower rate than it would be for the estate (for a residential property this rate is 18%, compared to 24% if sold through the estate). 
• The beneficiaries are charities, as they are exempt from CGT. 
• There is more than one beneficiary entitled to the residuary estate, as there would be multiple annual tax-free allowances to apply against the gain. 
 
It is possible to appropriate a property to beneficiaries with a legal document called a Deed of Appropriation. If they agree and have not utilised their CGT exemption, a Deed of Appropriation can be drafted signed by the relevant parties. 
 
The Deed of Appropriation would need to be signed and dated before contracts are exchanged on the sale of the property. 
 
This would mean that the property was no longer held by the estate but instead held on behalf of the beneficiaries. By selling the property in this way, the beneficiaries can utilise their individual annual tax-free allowances, provided they have not made any other chargeable gains in that tax year. 
 


  

Laura Stafford TEP

Director, Avery Walters Solicitors

Laura is a full member of the Society of Trust and Estate Practitioners (STEP),  Accredited member of Association of Lifetime Lawyers and a dementia friend.  Laura and her team can assist with the full spectrum of private client services. Laura’s focus is on complex taxable estates often including foreign property, complex Wills, estate planning and lifetime trusts.

Laura is well known for her sensitive but friendly approach, putting clients at ease when discussing potentially difficult topics. Laura provides pragmatic advice and is adept at expressing complex ideas in simple terms making the law accessible and user friendly.

Avery Walters Solicitors is a well-established friendly firm offering a wide range of legal services for individuals and businesses from offices across Yorkshire.  Laura Stafford qualified as a solicitor in 2017, joined Avery Walters in 2013 and was appointed Director in 2025.

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