Selling a second home or a buy-to-let can bring a welcome windfall, but a slice of that profit may belong to HM Revenue and Customs. Capital Gains Tax now catches far more sellers than it once did, because the tax-free allowance has been slashed from £12,300 in 2022/23 to just £3,000 today. The government estimated the cut would pull roughly 260,000 extra people into the tax for the first time, many of them ordinary landlords. If you are thinking of parting with a property that is not your main home, a little planning can save thousands. The rules are less fearsome than they first appear once you see how the pieces fit together. This guide breaks down the rates, the reliefs, the deadlines and the sums, so you know what to expect before you exchange.
Key Takeaways
- Capital Gains Tax applies to profit from a second property, buy-to-let or inherited home, never your main residence.
- For the 2026/27 year the rates are 18% for basic-rate taxpayers and 24% for higher-rate taxpayers.
- The tax-free annual exempt amount sits at only £3,000, down from £12,300 three years earlier and frozen until 2031.
- Report and pay the bill within 60 days of completion, or face an automatic penalty from HMRC.
- Allowable costs and reliefs such as Private Residence Relief can cut what you owe by a large margin.
What Is Capital Gains Tax on Property?
Capital Gains Tax, often shortened to CGT, is a charge on the profit you make when you sell an asset that has risen in value. You pay it on the gain, not the whole sale price. When it comes to property, it usually bites on second homes, buy-to-let investments and houses you have inherited but never lived in.
Your main residence is a different story. Thanks to Private Residence Relief, most people pay nothing when they sell the home they actually live in. That relief is automatic, so there is no form to complete when the property qualifies in full.
| Main home relief: If a property has been your only or main home for the whole time you owned it, Private Residence Relief usually wipes out any Capital Gains Tax, and you do not even need to claim it. |
Because the rules reward good preparation, it pays to get to grips with selling property and capital gains tax well before you market a home, ideally when you first buy or inherit it and set your base cost. Getting those opening figures right matters. An accurate valuation, whether at purchase, on the date of an inheritance or for probate, fixes the cost you later deduct, and a chartered surveyor or experienced agent can help you record it correctly.
This shift has turned many so-called accidental landlords, people who kept a former home or inherited one, into taxpayers who must now budget for a charge they never expected.
The 2026/27 Rates and Allowances
How much you hand over depends on your income. For the current tax year, residential property gains are charged at 18% where they fall within the basic-rate band and 24% above it. These figures have applied since April 2024, when the old 28% higher rate was trimmed.
Before any tax falls due, you deduct the annual exempt amount. You can confirm the current rates and allowances on the government website, but the headline number is stark. That allowance stands at just £3,000 per person. It was £12,300 as recently as 2022/23, dropped to £6,000, and has since been frozen at the lower figure until 2031. A married couple or civil partners who own a home jointly can pool their allowances to shelter £6,000. Freezing the figure while house prices climb quietly widens the net each year, since more of every gain becomes taxable.
| Item | 2026/27 |
|---|---|
| Annual exempt amount | £3,000 per person |
| Basic-rate CGT on residential property | 18% |
| Higher and additional-rate CGT | 24% |
| Reporting and payment deadline | 60 days from completion |
| Main home (Private Residence Relief) | Usually 0%, fully exempt |
The tax-free allowance has dropped from £12,300 to just £3,000, and it stays frozen there until 2031.
Your rate is decided by stacking the gain on top of your income. If the two together stay inside the lower band, which runs to £37,700 above the personal allowance, you pay 18%. Anything beyond that threshold is charged at the higher rate, so a single disposal can be taxed partly at each level. That interaction with income tax is why two people selling identical homes can end up with very different bills.
How to Work Out Your Gain
The calculation itself is simpler than it looks. Start with the sale price, subtract what you paid for the property, then take off your allowable costs and the yearly exemption. Whatever remains is taxed at your applicable rate.
Deductible expenses make a real difference, so keep every receipt. HMRC sets out which costs you can deduct, and they take in stamp duty paid on purchase, solicitor and estate agent fees, and the price of genuine improvements such as an extension or a new kitchen.
Routine upkeep does not count. Repainting a wall, fixing a boiler or general maintenance cannot be claimed, and neither can mortgage interest. The line falls between improving a property and simply keeping it in decent order. Good record keeping is your best defence, so hold on to completion statements, invoices for building work and any paperwork that proves what you spent.
The worked example below shows how quickly these numbers add up. A higher-rate seller with an £80,000 gain, reduced to £77,000 after the exemption, faces a bill of £18,480. Someone taxed at the lower rate on the same amount would pay noticeably less, as the following chart makes clear.
| Worked example (higher-rate seller) | Amount |
|---|---|
| Sale price | £360,000 |
| Less original purchase price | £250,000 |
| Less buying and selling costs | £16,000 |
| Less improvement costs | £14,000 |
| Chargeable gain | £80,000 |
| Less annual exempt amount | £3,000 |
| Taxable gain | £77,000 |
| Capital Gains Tax at 24% | £18,480 |
It is also worth remembering that presentation can lift the price you achieve, and a few smart improvements made before marketing may double up as allowable costs while helping the home show at its best.
The 60-Day Reporting Rule
Timing trips up many sellers. If tax is due on a UK residential property, you must report the sale and settle the bill inside 60 days of the completion date, using a dedicated online account with HMRC. This sits separately from your yearly Self Assessment return.
| Watch the clock: A UK residential property sale that produces a taxable gain must be reported and paid within 60 days of completion. A late return brings an automatic £100 penalty, and interest is charged on any tax paid late. |
Miss the window and the penalties begin at once. A late submission brings an automatic £100 charge, with further penalties after six and twelve months, and interest builds on any tax paid behind schedule. Leaving it until January to sort out is an expensive habit. If you sell more than one qualifying property in a single tax year, each disposal needs its own report before the deadline passes.
Video suggestion: a plain-English explainer of Capital Gains Tax for UK property and business owners. https://www.youtube.com/watch?v=hrEtO6u7yt4
Reliefs and Ways to Reduce Your Bill
Several legitimate steps can shrink the amount you owe. Private Residence Relief remains the largest, covering any period the home was genuinely your main residence, plus the final nine months of ownership regardless of how it was used then.
| Planning tip: Joint owners each get a £3,000 allowance, so a couple can shelter £6,000. Splitting a sale across two tax years, or transferring a share before selling, can stretch that further. |
Spreading disposals across two tax years lets you claim two annual exemptions rather than one. Passing a share to a spouse or civil partner before a sale can achieve the same effect, and may move part of the profit into a lower band. Capital losses help as well. A loss on one asset can be offset against gains elsewhere in the same year, and any unused amount carries forward, provided you notify HMRC within the four-year limit. Keeping a clear trail of your base cost and improvements also speeds up the eventual return and reduces the risk of overpaying.
One recent seller praised the team for securing a buyer quickly after an earlier sale had fallen through, a reminder that a smooth, well-timed sale is part of good planning.
For broader reading on wider money matters, the business pages are a useful hub, and if you are weighing up building extra income alongside a property portfolio, there are plenty of ideas to consider. For anything tied to your own numbers, though, a qualified adviser is the safer route.
Frequently Asked Questions
Do I pay Capital Gains Tax when I sell my main home?
Usually not. Private Residence Relief covers a home that has been your only or main residence throughout ownership, so most such sales are tax-free. Second properties, buy-to-lets and inherited houses you never occupied are treated differently.
How much is the tax on property in 2026?
Basic-rate taxpayers pay 18% on residential gains, while higher and additional-rate taxpayers pay 24%. You are taxed only on the profit above your £3,000 exemption, and your income decides which rate applies to you.
When do I have to pay it?
You must report and settle within the 60-day window after completion, through an online property account with HMRC. Missing the cut-off triggers an automatic £100 penalty, with more charges and interest if the delay drags on.
What can I deduct from my gain?
You may take off stamp duty paid at purchase, solicitor and agent fees, plus the cost of real improvements like an extension. Everyday decorating, repairs and mortgage interest cannot be claimed.
Can a couple lower their bill?
Yes. Spouses and civil partners each hold a £3,000 exemption, so joint owners can shelter £6,000 between them. Passing a share across before selling can also shift part of the gain into a cheaper band.
Conclusion
Capital Gains Tax on property is no longer a niche worry for the wealthy. With the exemption a fraction of its former size, even a modest profit on a second home can leave a genuine bill. Learn the rates, log your costs from day one, and diarise the 60-day deadline so it never catches you out. This guide offers general information rather than personal advice, so for a figure that fits your own situation, a qualified accountant or tax adviser is money well spent.
