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How are assets treated on death in terms of capital gains tax (CGT)?
On death, no CGT liability arises. The personal representatives of the estate are treated as acquiring the assets of the deceased at the market value upon death. Typically, this is the starting value for the purposes of calculating inheritance tax (IHT).
Similarly, there is no CGT liability when those same assets are transferred from the personal representatives to the beneficiaries of the estate - each of those recipients are considered to have received those assets at the market value at the time of death for CGT purposes and IHT purposes.
How are gains crystallised on a deceased estate treated?
If an asset is sold by the personal representative during the estate administration process, any gains accruing on the disposal are calculated with reference to the market value upon death. Any gains crystallised over this value are subject to CGT. The personal representative, however, has the same annual exempt amount as an individual would in the year of death and, also, in the following two years.
Are there any claimable losses that can be used?
Where an allowable loss has been made on a (pre-death) disposal by the deceased in the tax year that he or she dies, this can be set against chargeable gains in that year. Any excess losses are available to be carried back and used against gains in the three previous tax years. Gains accruing in a later year need to be relieved ahead of those of an earlier year and any further remaining unused losses cannot be carried forward and set against gains made by personal representatives, or those who inherit.
Claimable losses would typically be reported by the personal representatives via a self-assessment tax return for the tax year of the client’s death. The deadline for a self-assessment tax return is 31 January following the tax year of death.
Losses are claimable up to 31st January following tax year of death.
To sell or to transfer?
Choosing when to dispose of or transfer assets can have a significant impact on any potential CGT liability an estate may have. For example, if an estate is going to carry out a disposal, it may be optimal to transfer the asset to the beneficiaries of the estate prior to disposal. This may be the case if there are multiple recipients, thereby enabling any unused annual exempt amounts they may have to be utilised.
Or, if any or all of the recipients are non-UK tax residents that do not pay UK CGT, a transfer could result in even very substantial gains in the hands of the personal representative no longer being taxable(1) - non-UK residents are exempt from CGT on most gains, UK land and property are the main exceptions.
Additionally, as personal representatives are chargeable at the standard rate of 24%, recipients may be subject to lower rates of CGT than the personal representative.
Or it may be optimal for assets to be disposed of while they remain in the hands of the personal representatives to absorb their annual exempt amount. The remaining assets could then be transferred out so that the recipient’s annual exempt amount could be utilised.
Client examples
1) How are assets treated on death for CGT?
Scenario (for illustrative purposes only)
- Jane dies on 1 July 2025 holding listed shares acquired years ago for £120,000. The market value at death is £310,000.
- Position at death: The estate is treated as acquiring the shares at their market value at death.
- Any lifetime gains have been ‘wiped out’ for CGT purposes and the future baseline for CGT purpose will be £310,000, not £120,000.
HS282 Death, personal representatives and legatees (2025) - GOV.UK
2) How are gains crystallised on a deceased estate treated?
Scenario (for illustrative purposes only)
- Jane’s shares have been uprated to the market value at death of £310,000.
- The personal representative of the estate sells the shares on 1 November 2025 for £342,000.
- Capital gains computation:
- Sales proceeds £342,000
- Less base cost £310,000
- Chargeable gain £32,000
The personal representative can use the individual annual exempt amount (AEA) of £3,000 they have for the year of death (and a further 2 years if needed)
Taxable gain = £29,000 (£32,000-£3,000)
CGT = £29,000 @24% = £6,960.
Capital Gains Tax rates and allowances - GOV.UK
3) Are there any claimable losses that can be used (CGT carry-back in year of death)
Scenario (for illustrative purposes only)
- Jane disposed of shares on 1 May 2025 incurring a loss of £22,000 before her death on 1 July 2025 (same tax year 2025/26)
- Jane also had chargeable gains of £6,000 around the same time.
- In the preceding 3 years Jane had the following taxable gains (after annual exempt amount)
- 2024/25 £5,000
- 2023/24 £14,000
- 2022/23 £2,000
Carry-back steps
- Loss set against 2025/26 gain = £22,000 loss - £6,000 gain = £16,000 excess
- Carry back £16,000 - £5,000 gain (2024/25) = £11,000 excess
- Carry back £11,000 - £14,000 gain (2023/24) = No remaining loss
- 2022/23 gain £2,000 = no further losses to offset
Reduced historic CGT in tax years 2024/25 and 2023/24 (via amendments/ claims) by 31 January following the tax year of death via personal representatives filing.
HS282 Death, personal representatives and legatees (2025) - GOV.UK
4) To sell or transfer?
Scenarios (for illustrative purposes only)
- Split disposals to utilise multiple AEA’s (UK- resident recipients)
- Jane’s shares on death are valued at £310,000, now valued at £342,000.
- There are two UK-resident beneficiaries, both with unused AEA £3,000
- The personal representative also has an individual AEA of £3,000
- Personal representative realises a gain of £3,000 whilst shares still in estate to use PR AEA
- Personal representative transfers remaining shares split equally between both beneficiaries (transfers not chargeable events and beneficiaries accept market value at death as base cost)
- Each beneficiary sells enough shares to realise a £3,000 gain each
- Outcome - £9,000 of gains have been realised tax free.
HS282 Death, personal representatives and legatees (2025) - GOV.UK
- Moving disposal outside UK CGT “net”
- Jane’s shares are US stocks listed in the US with market value on death of £310,000
- The sole beneficiary is non-UK resident
- The personal representative transfers the shares to the beneficiary (no CGT on beneficiary transfer)
- The beneficiary then sells the shares for £342,000.
- UK CGT outcome – for non-UK residents, most non-UK assets are outside of UK CGT when disposed of by a non-UK resident*.
*beware that there may be equivalent taxes to be considered in the non-UK resident’s tax residency
- Non-UK resident beneficiary – UK property/ Land (direct or indirect)
- Jane’s estate holds a UK buy-to-let estate with base cost £500,000; current market value £560,000)
- The beneficiary is a non-UK resident
- If the personal representative transfers the buy to let to the beneficiary and the beneficiary sells the property, the beneficiary will still be within UK CGT when disposing of UK land/ property (inc. shares in a UK property-rich company)
- The beneficiary will be subject to UK CGT on any gain above the market value at the date of death and must be accounted for when a non-UK resident beneficiary disposes of the asset.
Investments and the income from them can go down as well as up and past performance is no guarantee of future returns. You may not recover what you invest.
This material is not tax, legal or accounting advice and should not be relied on for tax, legal or accounting purposes. Quilter Cheviot Limited does not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting adviser(s) before engaging in any transaction.
Tax treatment varies according to individual circumstances and is subject to change. Trusts, estate planning, mortgage, tax: Trusts, Estate planning, Buy to Let Mortgage, Taxation and Inheritance Tax Advice are not regulated by the Financial Conduct Authority.
