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Uplift in Base Value

Also known as: Probate Uplift, Death Uplift, CGT Reset

Definition

Uplift in base value is the automatic resetting of an asset's taxable value to its market price at the date of death, meaning beneficiaries only pay Capital Gains Tax on increases after inheritance, not on the deceased's lifetime gains.

This tax rule provides one of the most significant but least understood advantages in UK estate planning, potentially saving beneficiaries thousands of pounds in Capital Gains Tax when they eventually sell inherited assets.

What Does Uplift in Base Value Mean?

Under the Taxation of Chargeable Gains Act 1992, Section 62, when someone dies there is no charge to Capital Gains Tax on their assets. Instead, assets pass to beneficiaries at their market value at the date of death—known as the probate value. This creates an automatic "uplift" or "reset" of the base cost for CGT purposes, effectively wiping out any unrealized gains that accumulated during the deceased's ownership.

The probate value becomes the beneficiary's acquisition cost for future tax calculations. If Sarah inherits her mother's house that was bought in 1985 for £45,000 but is worth £280,000 at death, Sarah's base cost is £280,000—not the original £45,000. When she sells it 18 months later for £295,000, she pays CGT only on the £15,000 gain, not on the £235,000 increase during her mother's lifetime. At 24% (higher-rate CGT for residential property), this saves her approximately £52,800 in tax.

The same principle applies to all chargeable assets, including shares, investment portfolios, and business interests. David inherits investment shares worth £150,000 at his father's death. His father paid £30,000 for them over 20 years ago. David's base cost is £150,000, not £30,000—the £120,000 gain during his father's lifetime escapes CGT entirely. When calculating CGT on a future sale, the formula is: Sale price minus Probate value minus Allowable expenses equals Taxable gain. The current annual CGT allowance of £3,000 may cover small gains, with rates at 18% or 24% depending on the taxpayer's income tax band.

This benefit particularly helps surviving spouses and civil partners, who receive assets inheritance tax-free and benefit from the CGT reset—a valuable double tax advantage. However, it's worth noting that while inheritance provides this CGT uplift, lifetime gifts trigger immediate CGT at market value even if no money changes hands, making inheritance often more tax-efficient than gifting assets during your lifetime. Accurate probate valuations are critical because they set the base cost for all future CGT calculations, and HMRC can challenge unrealistic valuations years later when beneficiaries sell the assets.

Common Questions

"Do I have to pay Capital Gains Tax on property I inherited from my parents?"

Not on the inheritance itself—you receive it at its probate value. You'll only pay CGT if you sell the property for more than that probate value. For example, if it was worth £300,000 when you inherited it and you sell for £320,000, you'd pay CGT on the £20,000 gain only.

"My mother bought shares in the 1990s for £10,000—they're now worth £85,000. If I inherit them, what's my tax position?"

When you inherit those shares, your base cost for CGT becomes £85,000 (their value at your mother's death), not the £10,000 she paid. The £75,000 increase during her lifetime isn't subject to CGT. You'll only pay CGT on any growth above £85,000 when you eventually sell.

"Is it better to inherit my parents' property or have them gift it to me while they're alive?"

From a CGT perspective, inheritance is usually far more tax-efficient. A lifetime gift triggers immediate CGT on the property's gain (unless it's their main home), whereas inheritance provides an uplift in base value, resetting the CGT clock. However, lifetime gifts might reduce Inheritance Tax if your parents survive seven years, so professional advice considering both taxes is essential.

Common Misconceptions

Myth: "Inheriting property means I pay Capital Gains Tax on all the increase in value since my parents bought it decades ago."

Reality: This is incorrect. The uplift in base value means you inherit the property at its probate value, not at what your parents originally paid. You only pay CGT on increases after you inherited it. If your parents bought for £80,000 in 1995, it's worth £350,000 when you inherit it, and you sell for £365,000, you pay CGT on just £15,000, not £285,000. People confuse CGT with Inheritance Tax—IHT may be charged on the estate's value, but then CGT gets a fresh start for beneficiaries.

Myth: "The probate valuation doesn't matter much because I'm keeping the property anyway."

Reality: The probate valuation is critically important because it sets your base cost for CGT whenever you eventually sell—even if that's 20 years later. An artificially low probate value might reduce Inheritance Tax slightly, but could cost you far more in CGT when you sell. Always obtain professional valuations to establish an accurate, defensible probate value that HMRC won't challenge years later when you dispose of the asset.

Understanding Uplift in Base Value connects to these related concepts:

  • Capital Gains Tax: The uplift in base value is specifically a CGT relief mechanism that determines how CGT is calculated on inherited assets.
  • Probate: The probate process establishes the probate value which becomes the uplifted base value for CGT purposes.
  • Estate Valuation: Estate valuation during probate determines the exact amount of the uplift—the new base cost for all inherited assets.
  • Inheritance: The uplift applies specifically to assets received by inheritance on death, not to lifetime gifts.
  • Property: Property is the most common asset type where the uplift creates substantial CGT savings due to long-term appreciation.
  • Estate Planning Strategies: Understand how the uplift in base value affects decisions about whether to gift assets during your lifetime or include them in your will for maximum tax efficiency.
  • Selling Inherited Property: Learn how the probate value determines your CGT liability when selling inherited property and the 60-day reporting requirement.
  • Capital Gains Tax on Inherited Assets: Discover how to calculate CGT using the uplifted base value and minimize your tax liability when disposing of inherited investments.
  • Probate Valuation Process: See why accurate probate valuations are critical for establishing the correct base value that will apply for decades of future CGT calculations.

Need Help with Your Will?

Understanding tax concepts like the uplift in base value helps you make informed estate planning decisions that could save your beneficiaries thousands of pounds. The way you structure your will affects whether your loved ones benefit from this valuable CGT relief.

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Legal Disclaimer: This glossary entry provides general information about UK legal terminology and does not constitute legal or tax advice. Tax rates, allowances, and reliefs change annually and may be subject to reform. The uplift in base value reflects current UK tax law (2024/25) but has been under review and may be modified in future legislation. For advice specific to your situation, consult a qualified solicitor or tax advisor.