Executor Tax Obligations When Selling Property

When an executor sells property belonging to an estate, tax obligations do not end with Inheritance Tax. Capital Gains Tax, income tax on rental receipts, and strict HMRC reporting deadlines all come into play. Failing to handle these correctly can result in penalties, interest charges, and personal liability for the executor.

This guide explains every tax obligation an executor faces when selling estate property in England and Wales — from calculating the gain and understanding which reliefs apply, to filing on time and avoiding common mistakes. For a broader overview of the executor's role and legal duties, see our guide on selling property as an executor of an estate.

The executor's legal position on tax

An executor (or administrator, where there is no will) is the personal representative of the deceased. For tax purposes, the personal representative is treated as a distinct taxpayer — the estate is a separate taxable entity during the administration period, which runs from the date of death until the estate is fully wound up and all assets have been distributed to beneficiaries.

During this period, the executor is personally responsible for:

• Filing the estate's tax returns with HMRC, including the trust and estate tax return (form SA900) and any CGT returns for property disposals
• Calculating and paying any Capital Gains Tax on property sold above probate value
• Reporting and paying income tax on any income the estate receives (such as rental income, interest, or dividends) during administration
• Ensuring all tax liabilities are settled from estate funds before distributing the net proceeds to beneficiaries

If the executor distributes estate funds to beneficiaries before tax debts are cleared, and the estate then cannot meet its tax liabilities, HMRC can pursue the executor personally for the shortfall. This risk makes it essential to retain adequate funds until clearance is obtained.

IHT vs CGT: understanding the distinction

One of the most common sources of confusion for executors is the relationship between Inheritance Tax and Capital Gains Tax. They are entirely separate taxes, but they share a key reference point: the probate valuation.

It is entirely possible for the same property to attract both IHT (because the estate exceeds the nil-rate band) and CGT (because the property increases in value between death and sale). The two taxes do not offset each other. For more detail on how CGT works on inherited assets, see our guide on capital gains tax on inherited property.

How CGT is calculated when an executor sells property

The CGT calculation for an executor-led sale follows the same basic formula as any other property disposal, but with the probate value serving as the base cost rather than an original purchase price.

Taxable gain = Sale price − Probate value − Allowable costs − Annual exempt amount

The probate value as base cost

Under section 62 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992), the base cost for CGT on assets acquired on death is the market value at the date of death — the probate value. This is the figure reported on the IHT return (form IHT400 or the excepted estates return) and accepted by HMRC. Any gain or loss the deceased made during their lifetime is extinguished at death and is not carried over to the estate or the beneficiaries.

The accuracy of the probate valuation directly determines the size of the taxable gain. If the probate value was set too low, the gain when you sell will be larger, producing a higher CGT bill. If it was set too high, HMRC may query the IHT position. Executors should always obtain a professional valuation — either a RICS Red Book valuation or at least two or three independent estate agent opinions — and retain the documentation.

Allowable deductions

Executors can deduct the following costs from the gain:

• Selling costs. Solicitor and conveyancing fees for the sale, estate agent commission, and any other costs directly attributable to the disposal
• Capital improvements. The cost of any enhancement expenditure incurred after the date of death, such as structural repairs that improve the property's value, a new kitchen, or a new roof. Routine maintenance and redecoration are not allowable
• Valuation costs. The cost of obtaining the probate valuation, whether a RICS survey or an estate agent appraisal you paid for
• Costs of establishing title. Legal costs incurred in obtaining probate, to the extent they relate to the property

Worked example

Consider an executor who sells a property in February 2026 that was valued at £300,000 at the date of death in June 2024:

At the 24% rate (which applies to most estate gains because the estate's basic rate band is only £1,000), the CGT due would be approximately £6,193. This must be reported and paid within 60 days of completion.

The estate's annual exempt amount

Unlike individuals, who receive a CGT annual exempt amount indefinitely, an estate only receives the exemption for a limited period. For the 2025/26 tax year, the annual exempt amount is £3,000 and is available to the estate in:

• The tax year in which the death occurred
• The following tax year
• The tax year after that (i.e. two full tax years after the year of death)

From the fourth tax year of administration onwards, the estate receives no annual exempt amount. This has a direct practical consequence: if estate administration is protracted and the property is not sold until the fourth year or later, the entire gain is taxable with no exempt amount to offset it. This is one reason why delays in selling estate property can have a real financial cost beyond the ongoing expenses of maintaining the property.

Where there are multiple properties or other chargeable assets in the estate, the £3,000 allowance covers the estate's total gains for the year, not each individual disposal. Executors should consider this when deciding the order and timing of asset sales.

CGT rates for estates (2025/26)

Capital Gains Tax on residential property sold by an estate is charged at the same rates that apply to individuals:

The crucial difference for estates is that the basic rate band for trusts and estates is only £1,000 (compared with £37,700 for individuals). This means that in practice, almost all of any significant gain on estate property is taxed at the higher rate of 24%. Only the first £1,000 of taxable income and gains combined benefits from the lower rate. For strategies on reducing the CGT burden on inherited property, see our guide on how to reduce capital gains tax on inherited property.

Reporting CGT to HMRC: the 60-day deadline

When an executor sells a UK residential property, the disposal must be reported to HMRC and any CGT due must be paid within 60 days of the completion date. This requirement applies to all residential property disposals where there is a gain, regardless of whether the property was the deceased's main home.

How to report

Executors report through the HMRC Capital Gains Tax on UK Property online service. To file, you will need:

• A Government Gateway account (the estate's unique taxpayer reference if already registered for Self Assessment, or the executor's personal Government Gateway account)
• The completion date and the sale price
• The probate value (base cost) and details of all allowable deductions
• Details of any reliefs being claimed (though Private Residence Relief is not available to estates)

The gain must also be included on the estate's trust and estate tax return (form SA900) for the tax year in which completion occurred. The 60-day payment is treated as a payment on account against the final liability calculated on the SA900.

Penalties for late filing

HMRC's penalty regime for late CGT returns is automatic and escalating:

• Up to 6 months late: initial penalty of £100
• 6 to 12 months late: daily penalties of £10 per day for up to 90 days (maximum £900), plus the initial £100
• Over 12 months late: further penalty of 5% of the tax due, or £300 (whichever is greater), in addition to all earlier penalties

Interest is also charged on any unpaid CGT from the day after the 60-day deadline at HMRC's prevailing rate. Given these consequences, executors should prepare their CGT calculations before completion so that the return can be filed promptly.

Income tax during the administration period

CGT is not the only tax the executor may need to address. If the estate property generates rental income during the administration period, that income is taxable and must be reported on the estate's trust and estate tax return (SA900).

When rental income arises

Rental income can arise in several common scenarios:

• The deceased was a landlord and the property was already let at the date of death — the tenancy continues and rent accrues to the estate
• The executor lets the property during the administration period to cover ongoing costs such as the mortgage, insurance, and council tax
• A beneficiary occupies the property but pays rent to the estate (though this is unusual)

Allowable deductions for rental income

The executor can deduct the following from rental income:

• Mortgage interest (subject to the finance cost restriction — only basic rate tax relief is available for residential property finance costs)
• Buildings insurance premiums
• Repairs and maintenance (these are revenue expenses, not capital improvements)
• Letting agent fees and management charges
• Council tax, if paid by the estate rather than the tenant
• Utility bills, where the estate is responsible

Any net rental profit is taxed at the applicable income tax rates for estates: 20% on income within the basic rate band and 45% on income above it. The estate's basic rate band for income tax is £1,000.

Executor sale vs assent to beneficiary: tax implications

Executors face a choice when disposing of estate property: sell it directly from the estate, or transfer (assent) the property to a beneficiary and let the beneficiary sell. The tax consequences differ significantly.

The assent to a beneficiary is itself not a taxable disposal — no CGT arises on the transfer. The beneficiary inherits the probate value as their base cost, just as the estate would have used it. This means the total gain is the same regardless of route, but the rate and allowances differ. For situations where siblings inherit jointly, see our guide on selling an inherited house with siblings.

Common mistakes executors make with tax

The following errors arise frequently in practice and can lead to underpaid tax, penalties, or personal liability for the executor:

1. Distributing funds before settling tax. Once the estate's funds are distributed to beneficiaries, recovering money to pay a subsequent tax bill is difficult. Always retain sufficient funds to cover the estimated CGT and income tax liability, plus a margin for HMRC queries.
2. Missing the 60-day CGT deadline. The clock starts from completion, not from when the solicitor sends the final statement. Many executors are unaware of this deadline until it has passed. Instruct your solicitor or accountant to prepare the CGT return in advance of completion.
3. Using an inaccurate probate valuation. An undervalued probate figure inflates the CGT gain. An overvalued figure risks an HMRC enquiry into IHT. Invest in a proper valuation at the date of death and keep the evidence.
4. Confusing IHT and CGT. Some executors assume that because IHT has been paid on the property, no further tax is due. IHT and CGT are separate taxes on different elements of value. IHT being paid does not reduce or eliminate a CGT liability.
5. Claiming disallowable deductions. Only capital improvements and disposal costs are deductible for CGT. Routine maintenance, mortgage interest, insurance, and council tax are not CGT-deductible (though some may be deductible against rental income for income tax purposes).
6. Failing to file the SA900. Even if the 60-day CGT return has been filed and paid, the estate still needs to file a trust and estate tax return for each year of administration. This captures rental income, interest, and any adjustments to the CGT position.

When to seek professional advice

While straightforward estates with a single property and a modest gain can often be managed by a competent executor using HMRC's online tools, professional tax advice is strongly recommended in the following situations:

• The estate includes multiple properties or high-value assets
• The property has increased substantially in value since the date of death, producing a significant CGT liability
• There are multiple beneficiaries with different tax positions, and the choice between an executor sale and an assent has material tax consequences
• The property was let during the administration period and rental income needs to be reported
• The administration period has extended beyond three tax years, and the estate's annual exempt amount has expired
• There is any doubt about the probate valuation, or HMRC has challenged it

The cost of a qualified accountant or tax adviser is a legitimate estate expense and is typically money well spent when the potential CGT liability runs into thousands of pounds. For guidance on overall selling costs that come out of the estate, see our guide on solicitor fees for selling a house. If you are navigating the emotional and practical challenges of selling during this period, our guide on selling after bereavement offers further support.

Sources

• Taxation of Chargeable Gains Act 1992, section 62 — legislation.gov.uk
• Inheritance Tax Act 1984, section 191 — legislation.gov.uk
• HM Revenue & Customs — Capital Gains Tax: what you pay it on, rates and allowances (GOV.UK)
• HM Revenue & Customs — Report and pay Capital Gains Tax on UK property (GOV.UK)
• HM Revenue & Customs — Trusts and estates: Self Assessment trust and estate tax return (SA900) (GOV.UK)
• HMRC Capital Gains Manual, CG30700 onwards: Personal representatives and legatees — hmrc.gov.uk
• HMRC Inheritance Tax Manual, IHTM09701: Market value — hmrc.gov.uk
• HMRC Trust and Estate Tax Return Guide — hmrc.gov.uk
• Finance Act 2024 — legislation.gov.uk (residential property CGT rate changes)

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