Capital Gains Tax (CGT) on UK property applies when you sell a property that is not your main home and make a profit. The amount of tax you pay depends on your income tax band, available reliefs, allowable costs, and whether the property qualifies for exemptions such as Principal Private Residence Relief.

Selling a second home or buy-to-let property? You'll face either 18% or 24% Capital Gains Tax depending on your income—but there's a crucial 60-day deadline most sellers don't know about that could cost you penalties.

Key Takeaways

• Current CGT Rates: Capital Gains Tax on UK residential property is charged at 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers.
• Frozen Allowance: The annual exempt amount is frozen at £3,000 per person, allowing couples to combine allowances for £6,000 in tax-free gains.
• Scope of Tax: Properties subject to CGT include second homes, buy-to-let properties, and inherited properties sold for profit.
• Strict Timeline: You must report and pay CGT within 60 days of property sale completion, or face immediate financial penalties.
• Primary Home Exemption: Principal Private Residence Relief can eliminate CGT entirely if the property was your main home throughout ownership.

Selling a UK property that isn't your main home can trigger a significant Capital Gains Tax bill. Understanding the current rates and available reliefs helps property sellers avoid unexpected tax burdens and ensure strict compliance with HMRC requirements.

UK Property CGT Rates: 18% or 24% Depending on Your Income

Capital Gains Tax on residential property operates on a two-tier system that directly links to your income tax band. The rates are 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. Following recent legislative changes, these rates now sit fully aligned with standard CGT rates on other major assets.

The key distinction lies in how your total income determines which rate applies. HMRC adds your taxable gain to your income for the tax year. If this combined total falls within the basic rate band (up to £37,700 above the Personal Allowance), the 18% rate applies to that portion of the gain. Any part of the gain that pushes your combined income past the basic rate threshold faces the 24% rate.

Professional guidance becomes valuable when calculating these liabilities, as the interaction between income levels and gains can be complex. Carr Jenkins Hood specialises in helping property sellers navigate these calculations to ensure accurate tax planning and compliance.

Which Properties Are Subject to Capital Gains Tax

Not all property sales trigger Capital Gains Tax. Understanding which properties fall within CGT's scope helps sellers prepare for potential liabilities and plan their disposals effectively.

Second homes and buy-to-let properties

Any residential property that isn't your main residence is subject to CGT upon sale. This includes holiday homes, second properties purchased as investments, and buy-to-let properties acquired for rental income. The gain calculation considers the difference between purchase and sale prices, minus allowable costs and reliefs.

Inherited properties sold for profit (unless beneficiary's main residence)

For inherited properties, the gain is calculated from the property's market value at the date of inheritance, not the original purchase price paid by the deceased. If beneficiaries sell inherited properties for more than their inherited value, CGT applies to this gain unless the property has become their main residence.

Former main residences later rented out

Properties that were once main residences but subsequently became rental properties face CGT on the portion of ownership when they weren't the owner's main home. This requires a proportional calculation based on periods of physical occupation versus rental periods, though some reliefs may apply to the final period of ownership.

How Your Income Tax Band Determines CGT Rate

The determination of your CGT rate involves a calculation that many property sellers find surprising. HMRC doesn't simply look at your current income tax band; they perform a combined assessment of your annual income plus the capital gain.

Basic rate taxpayers pay 18%

If your annual income plus the capital gain stays within the basic rate threshold (frozen at £37,700 for the current 2026/2027 tax year), you'll pay CGT at 18% on the entire

gain. This rate applies even if your regular income alone places you at the basic rate, provided the addition of the capital gain doesn't push you into higher-rate territory.

Higher and additional rate taxpayers pay 24%

Higher-rate taxpayers automatically face the 24% CGT rate on property gains. Additionally, basic rate taxpayers whose gains push their total income above the higher-rate threshold will pay 18% on the portion within the basic rate band and 24% on the excess. This graduated approach can significantly impact the final tax liability.

Annual Exempt Amount: £3,000 Tax-Free Gains
The annual exempt amount provides a small buffer against CGT liabilities. For the 2026/2027 tax year (with legislation keeping this threshold frozen until 2031), individuals can realise up to £3,000 in capital gains without paying any tax.This allowance applies to all capital gains, not just property, so property sellers must consider other asset disposals during the same tax year.

Couples can combine allowances for £6,000 total

Married couples and civil partners can effectively double their tax-free allowance by utilising both partners' annual exempt amounts. This strategy requires careful planning, as each spouse must individually own a share of the property and separately dispose of their portion. Joint ownership structures and the precise timing of sales are important considerations for maximising this benefit.

Use it or lose it - cannot carry forward unused amounts

Unlike some tax allowances, unused annual exempt amounts cannot be carried forward to future years. If it is not used within the tax year, it is permanently lost. Property sellers must therefore consider the timing of their disposals carefully.

Principal Private Residence Relief Explained

Principal Private Residence Relief represents one of the most valuable CGT reliefs available, potentially eliminating tax liabilities entirely for qualifying properties.

Complete relief for properties used as main home

Properties that served as the owner's only or main residence throughout the entire ownership period qualify for complete CGT relief. This relief extends beyond just physical occupation—certain periods of absence, such as working abroad or living in job-related accommodation, may still qualify for relief under specific circumstances.

Lettings Relief remains severely restricted

Lettings Relief previously provided significant tax savings for properties that were main residences before becoming rental properties. However, this relief remains drastically curtailed and only applies when the property owner physically shares occupation with tenants, severely limiting its practical application for most landlords and former homeowners.

Allowable Costs That Reduce Your CGT Bill

Allowable costs provide important opportunities to reduce CGT liabilities by increasing the property's cost basis. Understanding which expenses qualify helps sellers maximise their tax efficiency while maintaining proper documentation.

1. Purchase Costs: All legitimate costs associated with acquiring the property can be deducted from the taxable gain. This includes solicitors' fees, survey costs, estate agents' fees from the original purchase, and the transactional property tax paid at the time of acquisition. If the property is in Wales, this means you will deduct Land Transaction Tax (LTT) paid to the Welsh Revenue Authority (WRA), rather than English Stamp Duty Land Tax (SDLT). Note that mortgage interest and ongoing financing costs are never deductible against capital gains.
2. Sale Costs: Disposal costs mirror acquisition costs in their deductibility. Estate agents' commissions, solicitors' fees for the sale, advertising costs, and Energy Performance Certificate (EPC) costs directly reduce the taxable gain.
3. Capital Improvements: Enhancement expenditure that increases the property's value qualifies for relief, but routine maintenance and repairs do not. Installing central heating, adding extensions, or converting lofts represent allowable improvements. However, decorating, replacing like-for-like items, or general upkeep do not qualify.

60-Day Reporting Deadline You Cannot Miss

UK property sellers face a strict 60-day deadline for reporting and paying CGT on residential property disposals. This deadline applies strictly from the completion date, not the exchange of contracts, and failure to meet it results in automatic interest and financial penalties.

For UK residents, the reporting requirement applies whenever there is a taxable gain after reliefs and allowances. If the entire gain is covered by Private Residence Relief or falls below the £3,000 annual exempt amount, reporting may not be required. However, non-UK residents disposing of UK property must report the disposal to HMRC regardless of whether tax is due.

HMRC's online system handles these returns, but the calculations behind them require careful consideration of all relevant factors.

Strategic Property Planning

Looking Ahead to April 2027: If you are selling property to reinvest the cash or restructure your portfolio, keep in mind that the government has confirmed a 2% tax rate hike on rental income bands coming next year (April 2027). Property income will be split into its own tax bracket, moving marginal rates to 22%, 42%, and 47%.

Related Guide: UK Property Tax for Landlords, Investors & Developers

Capital Gains Tax is only one part of the wider property tax picture. For a complete overview of property taxation for landlords, investors and developers, see our UK Property Tax Guide (A01).

FAQs: Capital Gains Tax on UK Property

What is the Capital Gains Tax rate on UK residential property?

Capital Gains Tax on UK residential property is charged at 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers, depending on your total taxable income and gains.

Do you pay Capital Gains Tax when selling your main home?

In many cases, no. If the property qualified as your only or main residence throughout ownership, Principal Private Residence Relief may remove the Capital Gains Tax liability completely.

How long do you have to report property Capital Gains Tax to HMRC?

UK residents generally have 60 days from property sale completion to report and pay any Capital Gains Tax due to HMRC.