Capital Gains Tax on Property Guide UK (Selling Your Home 2026)

When You Pay CGT on Property

CGT on property arises when you sell or dispose of a residential property that is not your main home and the gain exceeds your annual exempt amount (£3,000 for 2026/27). You also pay CGT when you sell a commercial property (though rates differ), land, or a property you inherited (based on its value at the date of death, not the original purchase price — but if you sell it later and it has increased in value, CGT applies on the increase since death). The most common triggers for residential property CGT are: selling a second home or holiday home; selling a buy-to-let property; selling a property you used to live in but have rented out (you may be eligible for Private Residence Relief for the period you lived there and Lettings Relief in some cases); selling a property you inherited and never lived in; and gifting a property to someone other than your spouse or civil partner (a gift is treated as a disposal at market value). What does NOT trigger CGT on property: selling your main home (covered by Private Residence Relief — see below); selling a property to your spouse or civil partner (no gain or loss treatment); and selling a property at a loss (you can claim the loss to offset against other gains, but only if the property was not your main home). The gain is calculated as the selling price (or market value) minus the purchase price, minus allowable costs (legal fees, estate agent fees, Stamp Duty Land Tax paid on purchase, and enhancement costs like an extension). You cannot deduct mortgage interest or ongoing maintenance costs from the gain — those are separate income tax deductions for buy-to-let landlords.

Private Residence Relief (Your Main Home Is Exempt)

Private Residence Relief (PRR) means you do not pay CGT on the gain from selling your main home, provided you have lived in it as your primary residence throughout your ownership period. The relief covers the house itself plus up to 5,000 square metres of land (about 1.25 acres). The final 9 months of ownership always qualify for PRR, even if you have already moved out (this helps if your old home takes time to sell). If you have lived in the property for only part of your ownership period, PRR applies proportionally. For example, if you owned a property for 10 years and lived in it for 6 years, 60% of the gain is exempt (plus the final 9 months). Lettings Relief: if you rented out a property that was once your main home, you could previously claim Lettings Relief of up to £40,000 to reduce the CGT charge. From April 2020, Lettings Relief was restricted to cases where you shared occupation with the tenant — it no longer applies to standard buy-to-let scenarios. Conditions for claiming PRR: the property must have been your only or main residence. If you have two homes, you can nominate one as your main residence by notifying HMRC within 2 years of acquiring the second property. If you do not nominate, HMRC will determine your main residence based on factual occupation. PRR also applies to job-related accommodation (such as armed forces, clergy, or care workers) — you can still claim PRR on a home you own but cannot occupy due to your job. If you sell a property at a loss, you cannot claim a CGT loss on your main home — PRR eliminates the gain but also blocks loss claims.

Selling a Second Home or Buy-to-Let

When you sell a second home or buy-to-let property, the gain is subject to CGT at the residential property rates (18% and 24% for 2026/27). The calculation works as follows. Step 1: calculate the gain (selling price minus purchase price). Step 2: deduct allowable costs (estate agent fees, legal fees, Stamp Duty Land Tax, capital improvements). Step 3: deduct any available Private Residence Relief and Lettings Relief (limited cases only). Step 4: deduct your annual exempt amount (£3,000 for 2026/27) if not already used against other gains in the same tax year. Step 5: apply the CGT rate — 18% on gains within the basic rate band (up to £37,700 of taxable income in 2026/27) and 24% on gains above that. Unlike shares (where the rates are 10% and 20%), property gains attract a higher rate to reflect the additional Stamp Duty and housing market concerns. Example: you sell a buy-to-let property making a gain of £50,000. After the £3,000 annual exempt amount, the taxable gain is £47,000. If your total taxable income (including salary, rental income, and other income) is £30,000, you have £37,700 of basic rate band available. You use part of it: £37,700 - £30,000 = £7,700 taxed at 18% (£1,386). The remaining £39,300 is taxed at 24% (£9,432). Total CGT = £10,818. If the property was jointly owned with your spouse, each of you uses your own annual exempt amount and basic rate band, potentially halving the tax bill. Spouse transfers: you can transfer a share of the property to your spouse tax-free before selling, doubling the annual exempt amount available. See our UK Capital Gains Tax guide → for more on using spouse exemptions.

CGT Rates on Property (18% and 24%)

The CGT rates for residential property in 2026/27 are 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. These rates apply to gains from selling residential property that is not your main home. They are higher than the standard CGT rates for other assets (10% and 20%) to reflect the government's policy of discouraging short-term property speculation and ensuring property investors pay a fair share of tax. The rate you pay depends on your total taxable income (including salary, self-employment profits, rental income, pensions, and dividends) combined with your taxable gains. The basic rate band is £37,700 for 2026/27. If your total taxable income plus gains (minus the annual exempt amount) exceeds this, the excess is taxed at the higher rate. Commercial property gains are taxed at the standard CGT rates (10% and 20%), not the residential property rates — this includes shops, offices, warehouses, and mixed-use property. Carried interest from property investment partnerships is taxed at 28% in most cases. Trusts pay CGT on property at a flat 24% rate (2026/27). The rates apply to the gain after deducting the annual exempt amount. If you sell property in the same tax year as realising other capital gains (from shares or other assets), the residential property gain is taxed first at its higher rates, and the annual exempt amount can be allocated in the most beneficial way. Planning ahead — using your annual exempt amount each year, transferring assets to a spouse, and timing disposals across tax years — can significantly reduce your overall CGT bill on property. For more on CGT planning, see our UK Capital Gains Tax guide →.

Reporting and Paying CGT on Property (60-Day Deadline)

Unlike CGT on shares (which is reported via your annual Self Assessment tax return), CGT on residential property must be reported and paid within 60 days of completion. This is a strict deadline — miss it and you face penalties and interest. The process is entirely online via HMRC's Capital Gains Tax on Property service (available at gov.uk). You need to: create or log into your government gateway account, provide details of the property (address, date of disposal, purchase date), enter the sale price and purchase price, list allowable costs (legal fees, estate agent fees, Stamp Duty Land Tax, enhancement costs), and the system calculates the provisional gain and the tax due. You pay the estimated CGT within the same 60-day window. You then include the final figures in your Self Assessment tax return for the relevant tax year, and HMRC reconciles the provisional payment against your actual liability. If you overpaid, HMRC refunds the difference. If you underpaid, you owe the balance plus interest. What happens if you miss the 60-day deadline: HMRC charges penalties — an initial £100 late filing penalty, then £10 per day after 3 months, plus 5% of the tax due after 6 months. Interest also accrues from the due date (60 days after completion). You must still file the return and pay the tax even if the deadline has passed. Multiple disposals: if you sell more than one property in the same tax year, you must report each disposal within 60 days of each completion. You cannot aggregate them into a single annual report. The 60-day rule applies to all disposals of UK residential property where CGT is payable, including gifts (where there is no cash to pay the tax — you must still report and pay within 60 days based on the deemed market value proceeds). Learn more about property taxes in our Stamp Duty guide →.

CGT on Gifts and Transferring Property

Gifting a property to someone (other than your spouse or civil partner) is treated as a disposal at market value for CGT purposes. Even though no money changes hands, you are deemed to have sold the property at its current market value, and CGT is calculated on the gain from your original purchase. This can create a tax bill without any cash to pay it — a common trap when parents gift property to children or put property into a trust. Spouse exemption: transfers between spouses or civil partners are tax-free — no gain or loss arises. The receiving spouse inherits the original cost basis, so the deferred gain is realised when they eventually sell the property. Trusts: transferring property into a trust is a disposal at market value, triggering CGT immediately. Trusts themselves pay CGT at 24% on residential property gains. Hold-Over Relief: if you gift a property (or sell it at an undervalue) and the recipient continues to use it as a business asset or as their main residence, you may be able to claim Gift Hold-Over Relief. This defers the CGT until the recipient sells the property. The relief is automatic for gifts of business assets (including rental properties in certain circumstances) but must be claimed jointly by both parties. Inheritance Tax interaction: gifting property may also trigger Inheritance Tax considerations — a gift of a property is a Potentially Exempt Transfer (PET) for IHT purposes. If you survive 7 years, the gift falls outside your estate. If you die within 7 years, the gift may be subject to IHT. For more on this interaction, see our Inheritance Tax guide →. Always take professional advice before gifting property — the tax consequences are often more complex than people expect.

FAQs

Do I pay CGT when I sell my main home?

No, your main home is exempt from CGT under Private Residence Relief. If you have a garden of more than 5,000 square metres, the excess land may be taxable. If you have let out part of your home, that portion may be subject to CGT.

What is the 60-day rule for CGT on property?

You must report and pay CGT on residential property disposals within 60 days of completion. This is much shorter than the Self Assessment deadline and catches many people off guard. The reporting is done online through HMRC's CGT on Property service.

Can I avoid CGT by living in a property before selling it?

Partially. If you previously lived in the property, the gain for the period you lived there is covered by Private Residence Relief. The final 9 months of ownership also qualify even if you have moved out. Gains for periods when you rented it out are taxable.

Do I pay CGT on an inherited property?

Inheritance Tax is paid on the estate, but you do not pay CGT on the value at the date of death. If you sell the inherited property later and it has increased in value since the date of death, you may pay CGT on that increase only. Your cost basis is the probate value.

Can I use my spouse's CGT allowance on property?

Yes. If you own the property jointly, each of you has a £3,000 annual exempt amount (2026/27), potentially sheltering £6,000 of gains in total. You can also transfer property between spouses tax-free before selling to make use of both allowances.