When personal representatives sell an estate asset, the gain is the sale price less the probate value and their allowable costs. Alongside the actual costs of selling, they can deduct a share of the cost of establishing title to the estate, and HMRC’s Statement of Practice 2/04 lets them take that share from a published scale based on the gross estate instead of apportioning the real legal bills.
Tax investigation insurance from £108.75 a year (£9.06 a month).Pays up to £100,000 of your accountant's fees if HMRC opens an enquiry. No excess. Buy online in a few minutes.
Estate administration often involves selling a house or a share portfolio before the estate is distributed. Executors and administrators (together, personal representatives) pay capital gains tax on any growth in value since death. The scale in SP 2/04 is a simple way to claim part of the probate costs against those gains, and it applies to deaths on or after 6 April 2004. For the wider tax position of an estate, see income tax and CGT during estate administration.
What can personal representatives deduct when they sell?
Under section 62(1) of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) the personal representatives are treated as acquiring the deceased’s assets at market value at the date of death, and the death itself is not a disposal. Where inheritance tax is chargeable on the estate and a value has been ascertained for inheritance tax, section 274 makes that the market value for capital gains (see the CGT uplift on death).
Section 38 TCGA 1992 then allows three types of cost:
- the acquisition cost, here the probate value;
- under section 38(1)(b), enhancement expenditure and expenditure incurred in establishing, preserving or defending title to the asset; and
- under section 38(1)(c), the incidental costs of the disposal, such as estate agents’, solicitors’ and auctioneers’ fees.
The cost of obtaining probate or confirmation, and the related work of valuing the estate, is expenditure on establishing title. The difficulty is that the solicitor’s bill covers the whole estate, while only some assets are sold. SP 2/04 solves that apportionment problem. General rules on what costs count are in allowable costs for capital gains.
Where does SP 2/04 come from?
HMRC’s Capital Gains Manual (CG30560) explains that after the House of Lords decision in IRC v Richards’ Executors (46 TC 626), the Inland Revenue agreed with professional bodies what it would accept as allowable expenditure when personal representatives sell estate assets. The agreement was published as SP 7/81 for deaths after 5 April 1981, revised in SP 8/94 for deaths after 5 April 1993, and revised again in SP 2/04 for deaths after 5 April 2004.
Paragraph 1 of SP 2/04 states that HMRC will accept computations based either on the scale or on the actual allowable expenditure incurred. The scale is a choice, not a requirement.
Worried about an HMRC check? Tax investigation insurance pays your accountant’s fees if HMRC opens an enquiry or compliance check. Solar Protect cover pays up to £100,000 with no excess. It never pays tax, interest or penalties.
From £108.75 a year (£9.06 a month) for individuals, £117.57 for sole traders and £207.50 for companies and partnerships, including IPT and the £20 admin fee.
See my price in 2 questions or call 01795 841 310.
★★★★★ Rated 4.9 out of 5 on Trustpilot from over 160 reviews
What are the SP 2/04 scale rates?
| Gross value of estate | Allowable expenditure for establishing title |
|---|---|
| Not over £50,000 | 1.8% of the probate value of the assets sold |
| Over £50,000 to £90,000 | A fixed £900, divided between all estate assets in proportion to probate value, allowed on the assets sold |
| Over £90,000 to £400,000 | 1% of the probate value of the assets sold |
| Over £400,000 to £500,000 | A fixed £4,000, divided in the same way |
| Over £500,000 to £1,000,000 | 0.8% of the probate value of the assets sold |
| Over £1,000,000 to £5,000,000 | A fixed £8,000, divided in the same way |
| Over £5,000,000 | 0.16% of the probate value of the assets sold, up to a maximum of £10,000 |
Two points are easy to miss. The band is set by the gross value of the whole estate, but the percentage applies only to the probate value of the assets actually sold. In the fixed amount bands, the fixed sum is spread across every asset in the estate by probate value, and only the share attaching to sold assets is deductible.
How does the scale work in practice?
Illustration only. Both examples assume the deaths were after 5 April 2004 and ignore any other gains.
Percentage band. The gross estate is £350,000. The executors sell the house, valued at £250,000 for probate, for £270,000 and pay £4,000 in agent and legal fees.
| Step | Amount |
|---|---|
| Sale proceeds | £270,000 |
| Less selling costs, section 38(1)(c) | (£4,000) |
| Less probate value | (£250,000) |
| Less SP 2/04 scale, 1% of £250,000 | (£2,500) |
| Gain | £13,500 |
Fixed amount band. The gross estate is £450,000, so the fixed £4,000 applies. The executors sell shares with a probate value of £90,000, which is one fifth of the estate. The scale deduction is £4,000 multiplied by £90,000 over £450,000, which is £800.
What else is deductible on top of the scale?
The scale covers only the cost of establishing title. CG30570 confirms that the actual fee charged for realising an asset is allowed separately under section 38(1)(c), and that for quoted securities a flat rate deduction of no more than £5 per transaction may be negotiated. Section 38(2)(b) also allows costs reasonably incurred in making a valuation needed for the capital gains computation. CG15260 adds that the cost of resolving a disagreement with HMRC over value, including appeal costs, is not allowable.
SP 2/04 contains a separate scale for corporate trustees, such as banks acting as executors or trustees, covering items like transfers of holdings to beneficiaries and investment fees. It applies from 6 April 2004 alongside the personal representatives’ scale.
Can beneficiaries use the scale when they sell?
No. CG30550 says these deductions are allowable only on gains realised by personal representatives in that capacity. A legatee who receives an asset and sells it later cannot claim them, nor can personal representatives acting as bare trustees for a legatee. Under section 62(4) the legatee is treated as acquiring the asset when the personal representatives did, at the market value at death, and that value does not include any of the estate’s costs.
This is one factor in deciding whether to sell inside the estate or pass the asset to a beneficiary first, alongside the 24% rate for personal representatives and each beneficiary’s own allowances. See whether executors should sell or pass on assets first.
Is the position different in Scotland?
CG30580 says that for Scottish estates the Board agreed with the Law Society of Scotland that the same scale may be used for the cost of establishing title. As an alternative, where the solicitor charged detailed fees, an appropriate share of those fees plus the percentage fee for realising the particular asset may be allowed; where a single percentage fee on the estate was charged, each case is agreed on its merits.
What mistakes come up most often?
- Claiming the scale and an apportionment of the actual probate bill for the same asset. It is one or the other.
- Choosing the band by reference to the net estate after debts rather than the gross value.
- Applying the percentage to the sale price instead of the probate value of the asset sold.
- Using the scale on a beneficiary’s later sale.
- Deducting inheritance tax, or the costs of agreeing a value with HMRC, as if they were allowable costs.
- Forgetting the timing rules. GOV.UK confirms personal representatives get the full annual exempt amount, £3,000 for 2026 to 2027, for the tax year of death and the following two tax years only, pay 24% on gains, and must report and pay tax on a UK residential property gain within 60 days. See selling inherited property.
If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.
Related Accountapedia entries
- Advertising and marketing costs: what is allowable
- What costs can be deducted from a capital gain
- Allowable expenses for landlords
- Executors’ personal liability for inheritance tax
- Are landlord licensing and safety costs allowable
Sources
- GOV.UK: Statement of practice 2 2004 4
- GOV.UK: Manual page CG30570
- GOV.UK: Manual page CG30560
- GOV.UK: Manual page CG30550
- GOV.UK: Manual page CG30580
- legislation.gov.uk: Act 1992 c. 12, section 62
- legislation.gov.uk: Act 1992 c. 12, section 274
- legislation.gov.uk: Act 1992 c. 12, section 38
- GOV.UK: Manual page CG15260
- GOV.UK: Rates
Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.