The short answer
CGT and IHT double tax happens when you sell an asset and pay capital gains tax (CGT) on the gain, and the cash you keep is still in your estate when you die, so inheritance tax (IHT) can apply to it too. In the worked example on this page, a £100,000 gain taxed at 24% CGT and then 40% IHT loses about 54% in total.
What is CGT and IHT double tax?
It is not a separate tax. It is two real taxes charged at different times on the same money. CGT is charged on the gain when you dispose of a chargeable asset, and the list of chargeable assets includes shares outside an ISA and cryptoassets (GOV.UK: what you pay Capital Gains Tax on). IHT is charged at 40% on the part of your estate above your available nil-rate bands (GOV.UK: Inheritance Tax). If you sell, pay CGT and keep the proceeds, those proceeds form part of your estate.
This guide covers UK-resident individuals who own assets in the UK, and the examples use the UK-wide rules for the 2026 to 2027 tax year. Non-UK residents, trusts and companies follow different rules, and if your income is taxed under Scottish rates the band figures may not apply to you. Take personal advice before relying on them.
Key facts: the rules behind the double tax
| Rule | Current position | Tax year | Source |
|---|---|---|---|
| CGT rates for individuals | 18% and 24% | 2026 to 2027 | GOV.UK: Capital Gains Tax rates and allowances |
| CGT annual exempt amount | £3,000 for most individuals | 2026 to 2027 | GOV.UK: Capital Gains Tax rates and allowances |
| CGT basic rate band | £37,700, added to your taxable income | 2026 to 2027 | GOV.UK: Capital Gains Tax rates |
| CGT on a gift (not to a spouse, civil partner or charity) | Treated as a disposal at market value | Ongoing | TCGA 1992 s17 |
| CGT on death | No disposal on death. Heirs take the asset at its market value at the date of death | Ongoing | TCGA 1992 s62 |
| IHT rate | 40% on the part of the estate above the threshold | Ongoing | GOV.UK: Inheritance Tax |
| Nil-rate band, residence nil-rate band, taper | £325,000; £175,000 (qualifying home to direct descendants); taper starts at £2 million | Fixed to the end of 2030 to 2031 | GOV.UK: Inheritance Tax thresholds policy paper (26 November 2025) |
| Spouse or civil partner | Gifts between spouses and civil partners are exempt from IHT without limit, if the recipient lives in the UK permanently | Ongoing | GOV.UK: Inheritance Tax gifts |
| Gifts and the 7-year rule | Generally tax free if you survive seven years. Taper relief can apply to gifts made 3 to 7 years before death | Ongoing | GOV.UK: Inheritance Tax gifts |
| Reporting a UK residential property sale | Report and pay CGT within 60 days of completion | Ongoing | GOV.UK: report and pay CGT on UK property |
UK-wide rules for the 2026 to 2027 tax year, checked against official sources on 12 October 2026.
Who can ignore this, and who should read on?
You can probably ignore it if the sale is covered by your annual exempt amount, if the asset is held in an ISA, or if your estate is comfortably below the thresholds that apply to you. You should read on if you hold shares, cryptoassets or property with a large gain, your estate is likely to be above the nil-rate bands, and you are deciding whether to sell, keep, give away or borrow against the asset.
- New decision: you have not yet sold and are choosing a route.
- Already sold: the cash is in your estate. The sections on gifts and spending still apply, but the sale cannot be undone.
- Estate below the thresholds: the IHT half of the example does not apply to you, though thresholds are fixed and values rise.
How much CGT will I pay when I sell shares, crypto or property?
For 2026 to 2027, individuals pay 18% or 24% on gains after the £3,000 annual exempt amount. The rate depends on how much of the £37,700 basic rate band your other taxable income leaves unused (GOV.UK: Capital Gains Tax rates and allowances; GOV.UK: Capital Gains Tax rates). Taxable income here means income after your Personal Allowance, which is £12,570 for most people (GOV.UK: Income Tax rates and Personal Allowances).
The 24% rate in the main example assumes the gain sits entirely above the basic rate band. If part of your gain falls inside the band, that part is taxed at 18%.
Reporting: a UK residential property sale must be reported and the tax paid within 60 days of completion (GOV.UK: report and pay CGT on UK property). Gains on other assets, such as shares and cryptoassets, can be reported, if you are UK resident, in a Self Assessment return or through the HMRC real time service (GOV.UK: report other capital gains).
What happens to the cash after I sell?
The cash is yours, and what is left at death is part of your estate. The CGT you paid has reduced the pot, but the remainder can still attract IHT at 40% if your estate is above the thresholds.
If you spend the money in your lifetime, it is no longer in your estate. If you reinvest it, the new asset can grow, and its whole market value at death is in the estate, not only the original sum. Reinvesting does not cancel the CGT already paid.
Worked example: how a £100,000 gain can lose about 54%
Illustration, not a real client. Sam is a UK-resident higher-rate taxpayer who sells an asset with a £100,000 gain.
Assumptions: the gain is taxed at 24%; the £3,000 annual exempt amount is ignored in the first table to keep the arithmetic clear; Sam keeps the proceeds as cash until death; Sam’s estate already exceeds all nil-rate bands, so every extra pound is taxed at 40%; no gifts, reliefs or growth. Only the £100,000 gain is tracked, because the original cost is in the estate under every option.
| Step | Working | Amount |
|---|---|---|
| Gain | Sale proceeds less original cost | £100,000 |
| CGT at 24% | £100,000 × 24% | £24,000 |
| Cash kept | £100,000 − £24,000 | £76,000 |
| IHT at 40% | £76,000 × 40% | £30,400 |
| Heirs receive | £76,000 − £30,400 | £45,600 |
| Total tax | £24,000 + £30,400 = £54,400 on £100,000 | 54.4% |
Illustration for 2026 to 2027 CGT rates and the 40% IHT rate. UK resident individual. Not a real client.
The two rates do not add to 64%. IHT applies to what is left after CGT, so the combined rate is 24% plus 40% of the remaining 76%.
With the annual exempt amount: £100,000 less £3,000 is £97,000, and 24% of that is £23,280. Cash kept is £76,720, IHT is £30,688, heirs receive £46,032, and total tax is £53,968, or about 54.0%.
What if I keep the asset instead of selling?
Holding the asset until death usually removes the CGT, because death is not a disposal and the asset passes at its market value on the date of death (TCGA 1992 s62). Only IHT is then charged on the full value, at 40% where the estate is above the thresholds.
On the same £100,000 gain, IHT is £40,000 and heirs keep £60,000, compared with £45,600 if Sam had sold and kept the cash. This only compares two routes. It does not mean you should never sell: you may need the money, the asset may be risky, or the sale may suit another plan.
What cannot be undone: a sale triggers CGT immediately. If you hold, the asset can fall in value before you need it, and the later heirs’ sale is then at the date-of-death value.
How do the nil-rate band and residence nil-rate band change the answer?
They reduce IHT, but only on the slice of the estate they cover. The nil-rate band is £325,000, and the residence nil-rate band is up to £175,000 when a qualifying home passes to direct descendants (GOV.UK: Inheritance Tax thresholds policy paper (26 November 2025); GOV.UK: residence nil-rate band). The residence band tapers by £1 for every £2 the estate exceeds £2 million. Both are fixed until the end of 2030 to 2031 (Finance Act 2026 s72).
The nil-rate band is not a lifetime allowance. It applies to the estate, and gifts you made in the seven years before death can use it up first (GOV.UK: Inheritance Tax gifts).
This is why the 40% figure in the examples is a marginal rate. If your estate is below your bands, the IHT column falls away and only CGT matters.
Can I give the asset away instead of selling it?
A gift to someone other than your spouse, civil partner or a charity is treated as a sale at market value for CGT, even though you receive nothing (TCGA 1992 s17; GOV.UK: market value). Gifts to a spouse or civil partner are usually not taxed for CGT (GOV.UK: what you pay Capital Gains Tax on) and are exempt from IHT without limit, provided the recipient is legally married to you or in a civil partnership with you and lives in the UK permanently (GOV.UK: Inheritance Tax gifts).
For IHT, a gift to someone else is generally tax free if you survive seven years. If you give something away but still benefit from it, it can still count as part of your estate (GOV.UK: Inheritance Tax gifts). Some reliefs can defer a CGT charge on gifts, so check before you give.
Can borrowing against an asset instead of selling reduce CGT and IHT?
Borrowing does not itself trigger CGT, because taking a loan is not a sale, gift or swap of the asset (GOV.UK: what you pay Capital Gains Tax on). A debt that is genuinely owed at death can also reduce the estate for IHT, because HMRC allows a deduction for debts the deceased actually owed (HMRC Inheritance Tax Manual IHTM28002).
This is the strategy the video describes, and it has conditions:
- Debt must be real and still outstanding. If you repay it before death, there is no deduction. After death, the liability counts if it is discharged from the estate, or if there is a real commercial reason for it staying unpaid and tax is not a main purpose (IHTA 1984 s175A).
- Some borrowing is restricted. Debt used to finance excluded property or certain relievable property can be restricted (IHTA 1984 s162A; IHTA 1984 s162B; IHTM28000).
- Debts funded by your own assets can be reduced. A debt is abated where what was given for it consisted of property derived from you, for example a loan from someone you had previously given money to (Finance Act 1986 s103).
- You pay interest and fees, and the lender can seek repayment from the estate, which may force a sale.
- You are spending, not saving. Heirs receive less overall. The saving is on tax only.
Illustration, not a real client. Sam keeps the asset with its £100,000 gain, borrows £100,000 secured on it, and spends the money. At death the estate is £100,000 lower because of the debt, so IHT on the gain slice is £0 instead of £40,000, assuming an estate above all bands and a debt that qualifies. If the loan costs 6% a year (an assumed rate), interest is £6,000 a year. Borrowing is regulated activity, so speak to a mortgage broker and independent financial adviser before acting.
How do selling, keeping, gifting and borrowing compare?
| Route | CGT now | IHT at death on the £100,000 gain | Who it may suit | Who it may not suit |
|---|---|---|---|---|
| Do nothing: keep until death | £0 (no disposal on death) | £40,000 | Those who do not need the money and want to keep control | Those who need cash, or hold a risky asset |
| Sell and keep the cash | £24,000 | £30,400 on the £76,000 kept | Those who need certainty or diversification | Those whose estate is above the bands and who will not spend the cash |
| Sell and spend the cash in your lifetime | £24,000 | £0 on that cash | Those who want to use the money now | Those who want to pass wealth on |
| Gift to someone other than a spouse | Tax on the gain at market value | £0 if you survive seven years, otherwise up to 40% | Those who can afford to give and live seven years | Those who need the asset or its income |
| Borrow against it and spend | £0 now | £0 if the debt qualifies and is outstanding at death | Those with equity, a lender willing to lend and a plan to repay or leave the debt | Those who cannot afford interest, or who want to leave an unencumbered asset |
Illustration for 2026 to 2027, UK resident individual, estate above all nil-rate bands. Figures follow the worked examples above.
Which changes announced or enacted could alter the decision?
| Change | Status | Date | Source |
|---|---|---|---|
| Nil-rate band (£325,000), residence nil-rate band (£175,000) and taper (£2 million) stay fixed | Enacted | Until the end of 2030 to 2031 | Finance Act 2026 s72; GOV.UK: Inheritance Tax thresholds policy paper (26 November 2025) |
| Unused pension funds and death benefits brought within IHT | Enacted, not yet in force | Deaths on or after 6 April 2027 | Finance Act 2026 ss66 to 71 (s71) |
| Autumn Budget | Scheduled | 28 October 2026 | HM Treasury: Budget date confirmation |
Status checked on 12 October 2026. Check for later changes.
Decision checklist: questions to answer before you decide
- Will my estate be above my nil-rate bands when I die, and by how much?
- Is the gain inside or outside the basic rate band, and have I used this year’s annual exempt amount?
- Do I need the money in my lifetime, or will it sit in cash?
- Would a spouse or civil partner be the natural recipient, and does that change the answer?
- Can I afford interest and fees if I borrow, and what happens if the lender asks for repayment?
- If I give the asset away, can I live without it, and can I live for seven years?
- Do I have a will, and are my family’s circumstances likely to change?
When do I need personal advice, and what does an engagement involve?
Take advice before any sale, gift or borrowing that cannot be reversed, when your estate is near a threshold, or when the asset is property, a business holding or sits in a trust or company. An accountant can calculate the CGT and IHT on your own figures. A solicitor can advise on wills, trusts and legal ownership. An independent financial adviser or mortgage broker can advise on borrowing and investment.
An Optimise Accountants engagement starts with a call to understand your assets, your ownership and your plans, then maps the CGT and IHT on each option so you can compare them. We do not choose for you, and nothing here is a promise of a saving.
Book a call or download the UK Property Tax Guide. Our Next Phase Property Tax Planning guide covers CGT and IHT for established landlords.
Related guides: capital gains tax on buy to let property, capital gains tax advice and inheritance tax advice.
Frequently asked questions
Do I pay CGT and inheritance tax on the same asset?
Not on the same asset at the same moment. You pay CGT when you dispose of an asset at a gain. IHT is charged on the estate at death, so cash left from a sale can be taxed again. Holding the asset until death usually removes CGT but not IHT.
Is there capital gains tax when someone dies?
No. Death is not a disposal, and the asset passes to the heirs at its market value on the date of death (TCGA 1992 s62). Heirs who later sell are taxed only on growth after that date.
Is the nil-rate band a lifetime allowance?
No. The nil-rate band is £325,000 and applies to the estate and to gifts made in the seven years before death. The residence nil-rate band is a separate £175,000 for a qualifying home passed to direct descendants. Both are fixed until the end of 2030 to 2031.
Does borrowing against my property avoid CGT?
Taking a loan is not a disposal, so it does not trigger CGT by itself. The debt does not remove the gain, and you pay interest. Whether it reduces IHT depends on the debt being genuine, still owed at death, and not restricted by the rules in IHTA 1984 ss162A, 162B and 175A or Finance Act 1986 s103.
Do I have to report a share or crypto sale to HMRC?
UK residential property sales must be reported within 60 days. For other assets you can report in Self Assessment or through the HMRC real time service. Check GOV.UK for the thresholds that apply to your situation.
About this guide
General information only, not tax, legal or financial advice. Rules and schemes change; take advice on your own circumstances. This guide is based on UK rules for the 2026 to 2027 tax year as at 12 October 2026.
Written by Simon Misiewicz FCCA, ATT, MBA, Director, Optimise Accountants Limited. Last reviewed: 12 October 2026. Next review: after the Budget on 28 October 2026.
Watch the video: Selling Shares or Property? CGT Then IHT Takes 54%.
