Inheriting shares is one of the few situations where the CGT slate gets wiped clean. Whatever the deceased originally paid is irrelevant \u2014 your cost basis starts fresh. But that clean start comes with its own complications.<\/p>\n
Under TCGA 1992 s.62<\/a>, when someone dies, their assets are treated as disposed of and reacquired by the personal representatives at market value on the date of death<\/strong>. No CGT is charged on that deemed disposal \u2014 the gain accumulated during the deceased’s lifetime simply disappears.<\/p>\n When you eventually receive the shares (either directly or after probate), your cost basis is that date-of-death market value. If your grandmother bought BP shares for \u00a3500 in 1995 and they were worth \u00a315,000 when she died, your base cost is \u00a315,000. The \u00a314,500 of growth during her lifetime is never taxed as CGT.<\/p>\n This is sometimes called the “free uplift on death” \u2014 and it’s one of the most significant CGT reliefs in the system. The Low Incomes Tax Reform Group<\/a> has a clear explanation of how this interacts with other reliefs.<\/p>\n For listed shares (anything on the London Stock Exchange, NYSE, NASDAQ, etc.), the date-of-death valuation uses the quarter-up rule<\/strong>: take the lower of the two prices in the Stock Exchange Daily Official List, then add one-quarter of the difference. In practice, most people use the mid-market closing price on the date of death \u2014 HMRC rarely challenges this for mainstream listed shares.<\/p>\n If the person died on a weekend or bank holiday, use the prices from the nearest trading day. The HS284 helpsheet<\/a> covers the mechanics.<\/p>\n For unlisted shares, you’ll need a professional valuation. HMRC’s Shares and Assets Valuation team (SAV<\/a>) handles these \u2014 and they will scrutinise the figure.<\/p>\n Your gain is simply: sale proceeds minus the date-of-death valuation. All the normal rules apply \u2014 share matching<\/a>, current CGT rates<\/a>, the \u00a33,000 annual exemption.<\/p>\n If you inherit shares and add them to an existing holding of the same company in your GIA, they enter your Section 104 pool<\/a> at the date-of-death valuation. The pool’s average cost adjusts accordingly.<\/p>\n Example:<\/strong> You already hold 200 HSBC shares in your pool at an average cost of \u00a35.50 (total cost \u00a31,100). You inherit 300 HSBC shares valued at \u00a37.20 on the date of death (value \u00a32,160). Your pool is now 500 shares with a total cost of \u00a33,260, average \u00a36.52.<\/p>\n If you sell inherited shares for less than the date-of-death valuation, that’s a capital loss. You can use it to offset other gains, just like any other loss. See our losses guide<\/a>.<\/p>\n However, there’s a timing issue. If there’s a long gap between the death and you receiving the shares (probate can take months or years), the market may have moved significantly. Your base cost is fixed at the death date value regardless of what happens during probate.<\/p>\n People often confuse CGT with inheritance tax (IHT). They’re separate taxes with separate rules. IHT is charged on the estate above the nil-rate band (currently \u00a3325,000, or \u00a3500,000 if a family home is passed to direct descendants). CGT is charged when you, the inheritor, sell the assets.<\/p>\n It’s possible to pay IHT on an inheritance and then CGT when you sell. They don’t offset each other. The MoneyHelper guide on tax after a death<\/a> covers both taxes in one place.<\/p>\n Record the date-of-death market value for every inherited holding. You’ll need it when you eventually sell \u2014 which might be years from now. Keep a note alongside your other CGT records<\/a>.<\/p>\nGetting the valuation right<\/h2>\n
When you sell inherited shares<\/h2>\n
What if the shares have fallen since death?<\/h2>\n
CGT vs inheritance tax \u2014 they’re different<\/h2>\n
Practical steps<\/h2>\n