HS282 Death, personal representatives and legatees (2024)
Updated 6 April 2024
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This helpsheet explains:
- how Capital Gains Tax (CGT) applies when someone dies
- how to calculate gains or losses made by the personal representatives and those who inherit property from the deceased
This helpsheet provides an introduction to CGT when someone dies. It will help you fill in the Capital Gains Tax summary pages of your tax return. Read the Capital Gains Manual for more information on CGT rules.
HMRC recommends that you speak to your tax advisor about your personal circumstances. We can also help you and provide any forms you may need.
To find out about liability to Inheritance Tax, read the Inheritance Tax section of this helpsheet.
1. Meaning of terms
These notes mostly refer to the legal terms used in England and Wales. Many taxation principles are the same in Scotland and Northern Ireland. However, the general law background may be different, therefore, some of the terms used for cases in Scotland may differ from the terms in these notes.
A personal representative is someone who is responsible for settling the affairs of a deceased person. Outside Scotland, executors and administrators are personal representatives. In Scotland, executors nominate and executor’s dative are personal representatives.
The administration period is the period in which the personal representatives are settling the estate. It starts on the date of death of the deceased person, and will end for tax purposes when either:
- the residue of the estate is ascertained
- any disputes about the will are resolved
The residue of the estate is ascertained when:
- the net balance of the estate has been identified
- enough funds have been provided to pay any liabilities
For CGT purposes, a legatee is someone who benefits:
- from a testamentary disposition (usually a will)
- on an intestacy or partial intestacy
Legatees include trustees of a settlement made under the terms of the will or intestacy.
2. General position
There is no CGT charge when someone dies. Instead, there are special rules.
The assets the deceased owned on the date of their death are treated as though they had passed to the personal representatives or other person to whom they pass by law on the date of death, at their market value on that date. This includes any joint interests, which in effect pass immediately to the survivors. This means that, when the administration of the estate is complete, the remaining assets are:
- passed to the legatees
- treated as though they were passed to the legatees on the date of death, at their market value on that date
2.1 If you are a UK resident
You must tell HMRC and pay any CGT due within 60 days of the date of completion if you:
- are resident in the UK
- are liable to pay CGT
- sell or dispose of all or part of an interest in UK residential or commercial property
Read Report and pay Capital Gains Tax on UK property to find out more about reporting.
Personal representatives do not pay tax at the same time as submitting the online return. If you are a personal representative, HMRC will contact you with details of:
- the amount due
- how you can make the payment
The Annual Exempt Amount (AEA) is available for disposals made in:
- the same year as the death
- the 2 years following the death
2.2 If you are non-resident
You must tell HMRC and pay any CGT due within 60 days of the date of completion if you:
- are non-resident
- sell or dispose of all or part of an interest in UK residential or commercial property, or other UK land
You may need to pay CGT on any gains you make. For more information, read HS307 Non-Resident Capital Gains (NRCG) on direct and indirect disposals of interests in UK land and property.
The personal representatives are deemed to have the same residence and domicile status as the deceased had on their date of death. You need to report the disposal to HMRC if:
- you are the personal representative of a deceased person who lived abroad
- UK residential or commercial property, or other UK land, has been disposed of
2.3 Example 1
Mr Andrews dies on 10 October 2023. At the time of his death, he owns:
- a house, valued at £175,000
- some shares, valued at £25,000
- £20,000 in a bank account
All of these are treated as passing to his personal representatives at those values.
The administration of the estate is completed on 31 January 2025. On this date, the house is worth £200,000 and the shares £18,000. These assets are passed to Mr Andrews’ legatees, but are treated as though the legatees acquired them on 10 October 2023 at values of £175,000 and £25,000.
3. CGT liability for periods up to the date of death
If the deceased disposed of assets before their death, CGT may be due. The personal representatives must agree with HMRC the liability of the deceased if, before the death:
- returns of the gains were not sent to HMRC
- the deceased and HMRC did not agree a correct amount of tax
Agreeing the liability of the deceased involves:
- settling any points that are open for the years when the deceased made a tax return
- completing a return for the tax year in which the death occurred
- completing tax returns for any previous years where the deceased did not make a tax return
- agreeing the liability for the year of death and for any years when the deceased did not make a tax return
- making the appropriate payments
4. Annual Exempt Amount (AEA)
Where it is available, the amount of the AEA is not restricted in the year when an individual dies. The entire AEA can be set against the deceased’s chargeable gains from that year, regardless of the length of time between the start of the tax year (6 April) and the date of death.
4.1 If the deceased was non-domiciled in the UK
AEA is not available if the deceased:
- was non-domiciled in the UK
- claimed the remittance basis of taxation on their foreign income and gains
For example, the deceased may be non-domiciled if they were born outside the UK and intended to return to their country of birth.
4.2 Losses in the year of death
If there were losses on assets disposed in the tax year when the deceased died, these must be set off against any chargeable gains made in that period.
The losses must be set against all gains, even if the net chargeable gains will be lower than the AEA.
If allowable losses remain, they must be carried back. Allowable losses can be set off against gains made in the 3 tax years before death. They must be set off against gains in a later year before making set-offs against gains of an earlier year.
Losses carried back in this way are set off to reduce the net chargeable gains to the amount of the AEA. The full benefit of the AEA still applies for those years.
Personal representatives and legatees cannot use any losses which are not set off.
Example 2 — Losses carried back
Mrs Gee died on 30 September 2024. In the period 6 April 2024 to 30 September 2024 she had chargeable gains of £1,000 and allowable losses of £10,000. In the 3 previous tax years her net chargeable gains were:
| Year | Amount |
|---|---|
| 2021 to 2022 | £21,200 |
| 2022 to 2023 | £3,000 |
| 2023 to 2024 | £6,300 |
First, set off the 2024 to 2025 losses against her gains of that year.
2024 to 2025
| Chargeable gains | £1,000 | |
|---|---|---|
| Allowable losses | £10,000 | |
| Set-off | £1,000 | £1,000 |
| Net chargeable gains | zero | |
| Excess losses available to carry back | £9,000 |
Second, set off excess losses against gains of earlier years, taking into account later years before earlier years. Therefore, you need to consider 2023 to 2024 first.
2023 to 2024
| Amount | |
|---|---|
| Chargeable gains | £6,300 |
| Covered by AEA | £6,000 |
| Limit set-off to | £300 |
Therefore reducing CGT to zero.
| Allowable losses brought back | £9,000 |
|---|---|
| Set-off 2023 to 2024 | £300 |
| Excess loss to carry back | £8,700 |
Third, consider 2022 to 2023. Net chargeable gains of £3,000 are already fully covered by the AEA. Therefore, none of the losses brought back should be set against these gains.
Fourth, consider 2021 to 2022.
2021 to 2022
| Amount | |
|---|---|
| Chargeable gain | £21,200 |
| Covered by AEA | £12,300 |
| Available to set loss against | £8,900 |
As this exceeds the losses brought back of £8,700, all those losses can be set against the 2021 to 2022 assessment.
| Net chargeable gains before set-off | £21,200 |
|---|---|
| Minus losses brought back | £8,700 |
| Revised net chargeable gains for 2021 to 2022 | £12,500 |
| Minus AEA | £12,300 |
| Gains chargeable to tax | £200 |
5. CGT liability for the period of administration
During the period of administration, the personal representatives may be liable to CGT if they sell or otherwise dispose of any of the assets in the estate. This does not apply when assets are passed to legatees under the terms of the will.
During this period, the personal representatives have absolute control over the assets, except those that have been passed to the legatees. They are not bare trustees or nominees for the legatees.
The gain is chargeable on the personal representative, and not the legatee, when:
- an asset has not been formally transferred to a legatee
- the residue of the estate has not been ascertained
- the asset is disposed of by the personal representatives
- a gain arises
6. Residence status of the deceased
Only individuals who are resident in the UK for tax purposes are liable to CGT.
The personal representatives are treated as having the same residence and domicile status as the deceased. This means that, if the deceased was non-resident before their death, their personal representatives will not usually be liable on disposals. This applies even if the personal representatives are resident in the UK.
Personal representatives of a non-resident individual may be liable to CGT on certain assets they dispose of. For example, where the deceased used the assets to carry on a trade in the UK through a permanent establishment or UK residential property.
Read the Residence, remittance basis etc notes to find out more about residence and domicile.
7. Calculating gains and losses
Most CGT rules apply to personal representatives as to individuals when calculating gains and losses. There are some exceptions.
Assets owned by the deceased on the date of their death are treated as though they had passed to the personal representatives:
- on the date of death
- at their market value on the date of death
This is the ‘cost’ or acquisition value of the assets.
If the personal representatives acquire an asset when administering the estate, the actual cost or value of the asset is used when calculating gains or losses made on its disposal.
8. AEA to personal representatives
Personal representatives can use the full amount of the AEA for the:
- period from the date of death to the following 5 April (no matter how short this period is)
- 2 tax years after the year of death
This means one AEA against gains in each of those years. Where gains arise in a later year, no AEA is due.
9. Rate of tax
For 2023 to 2024 the rate of CGT for personal representatives is:
- 28% on residential property
- 20% on other chargeable assets
These rates are the same for trustees.
10. Expenses incurred by personal representatives
As a personal representative, you will incur legal and other expenses when administering the estate. For example, you will need to pay a fee when obtaining a grant of probate.
If you sell or dispose of some of the assets of the estate, some of this expenditure may be allowed when you calculate the gains or losses.
Because of the way solicitors charge for their services, it is often difficult to isolate the allowable expenditure from other expenditure which isn’t allowable.
HMRC will accept calculations which include deductions for costs of establishing title, which are based on a published scale. The scale is published as Statement of Practice SP02/04 and applies to deaths after 6 April 2004.
You can claim the actual expenditure if this is known. You can only do this if you have disposed of assets from the estate.
11. Transfer of assets to legatees
As a personal representative, you will complete the administration of the estate, then pass assets to legatees according to:
- the wishes of the deceased, as written in their will
- the rules laid down for when there is no will
You have usually completed the administration of the estate when you have ascertained its residue.
No CGT applies when you pass the assets to the legatees. Under the special rules, assets which were owned by the deceased on the date of their death are treated as though the legatees acquired them:
- on the date of death
- at their market value on the date of death
Read example 1 to find out how the special rules are applied.
Sometimes, you will acquire assets yourself during the administration, then pass these assets to legatees under the terms of the will. In this case, the assets will be treated as though they were acquired by the legatees:
- on the date you acquired them
- at either the amount you paid for the assets or their value when you acquired them
12. Treatment of legatees
All assets acquired by a legatee following a death, which were owned by the deceased at the date of death, are treated as though the legatee acquired them:
- on the date of death
- at the market value on the date of death
Assets acquired by the personal representatives during the administration under the terms of the will are treated as though they were acquired by the legatee:
- on the date of acquisition by the personal representatives
- at the cost to, or value at which they were acquired by, the personal representatives
The normal rules of CGT will apply if the legatee later sells or disposes of those assets.
The legatee cannot claim:
- unused losses of the deceased or personal representatives
- any expenses incurred by the personal representatives to establish title to the estate
On future disposals, the legatee can claim any expenditure incurred by them or the personal representatives when the asset was transferred to them.
13. Valuation of assets of the deceased at the date of death
A legatee is treated as though they acquired assets from an estate at their market value.
Sometimes, a legatee only acquires part of an asset. For example:
- a holding of shares is divided between several legatees
- several legatees become joint owners of an indivisible asset, such as land
The acquisition cost of each legatee’s share will be the appropriate fraction of the market value of the holding or asset.
To calculate the Inheritance Tax liability of the estate, you may need the value of an asset on the date of death. This value may also be an acquisition cost for CGT purposes if the personal representatives or the legatee later disposes of the asset. There are special rules to make sure the same value is used to deal with both taxes.
13.1 Example 3
On 31 December 2023, a person dies having a shareholding of 600 shares in a company. This represents a 60% holding in that company and is valued at £60,000 or £100 a share. On the date of death, a holding of 200 shares, or 20% of the company, would have been valued at £2,000 or £10 a share.
When residue is certain, each of the 3 legatees receives 200 shares from the personal representatives. They are each treated as having an acquisition cost of 1/3 of £60,000 (the personal representatives’ acquisition value). Their acquisition cost is therefore £20,000, not the value of £2,000 that would have been placed on a 20% shareholding.
You must use this value as the acquisition cost for CGT purposes if:
- the value of an asset is needed for the purposes of both taxes
- it has been ‘ascertained’ for the purposes of Inheritance Tax on the estate of the deceased at death
In some cases HMRC may not need to determine the values of some or all of the assets.
This can happen if:
- all of the assets pass to a surviving spouse or civil partner and the entire estate is exempt
- the estimated value of the estate is well below the Inheritance Tax threshold
- particular assets qualify for 100% relief from Inheritance Tax
In these cases, the values are not ‘ascertained’ under the special rules because they were not considered in any detail or considered at all.
Sometimes, when a person dies, the estate of their late spouse or civil partner needs to be valued for Inheritance Tax purposes, even though there had been no liability on the first death because it was within the nil-rate band for Inheritance Tax, after any spouse or civil partner exemptions. This is because any unused nil-rate band on the first death is added to the nil-rate band for the second death. In this situation, the value on the first death is not treated as ascertained for Inheritance Tax purposes. This will apply regardless of the interval between the deaths. Read the Inheritance Tax Manual for more information.
If the personal representatives or legatees dispose of the asset, the acquisition value must be agreed or determined.
14. Variation of the terms of the will or intestacy
Sometimes, the legatees may want to change how the estate will be distributed. They can do this using a deed of variation, or a similar legal document.
Where the document is legally valid, and if certain conditions are met:
- the variation will not be a disposal for CGT purposes
- the rules outlined in this helpsheet will apply as if the variation was included in the will
In other words, the rules outlined in this helpsheet apply as they would if the terms of the deed had been included in the will.
All of the following conditions must be met:
-
the variation must be effected by an instrument in writing made within 2 years of the deceased’s death
-
the persons who wish to give up all or part of their entitlement under the will or intestacy provisions must be parties to the instrument
-
there must be no consideration in money or money’s worth for the variation other than consideration in the form of a disclaimer or variation of other dispositions of the same estate
-
the instrument must contain a statement that the parties intend section 62(6) Taxation of Chargeable Gains Act 1992 to apply
You can use Checklist form IOV2 to help you meet the requirements for an instrument that is effective for CGT or Inheritance Tax purposes.
Sometimes proceedings are brought under the Inheritance (Provision for Family and Dependants) Act 1975. If the court makes an order under section 2 of that Act, the terms of the order are deemed to have applied from the date of death for all purposes. This means that:
- there are no capital gains disposals on the making of the order
- the special rules in this helpsheet apply
The variations will involve disposals by some of the parties, which may have CGT consequences, if:
- the conditions are not met
- the terms of the deed are not treated as included in the will
This is a complex area. In such cases, you may want to seek professional advice.
A trust may be declared in the deed of variation. If the trust replaces an absolute gift of assets under the will, the settlor of the trust for CGT purposes is the person who gave up their entitlement under the will, in favour of the trust.
If the trust fully or partly replaces another trust declared in the will, ask your tax advisor, or the office dealing with the estate, for help. If it was executed after 5 April 2006, the testator is the settlor.
15. Inheritance tax
Inheritance Tax is administered by HMRC.
For help with Inheritance Tax, contact the Inheritance Tax: General enquiries helpline. Quote the deceased’s HMRC reference number, if you know it. Alternatively, you can give the full name of the deceased and their date of death.
16. Contact
For support with online forms, phone numbers and addresses, contact Self Assessment: general enquiries.
Read Dealing with the estate of someone who’s died to find out more about bereavement and dealing with the estate in the administration period.