Capital Gains Tax on Property 2026/27

CGT Rates for Residential Property 2026/27

For the 2026/27 tax year, Capital Gains Tax on residential property (including second homes, buy-to-let properties, and inherited properties that are not your main home) is charged at: 18% for gains that fall within your basic-rate income tax band, and 24% for gains that fall within your higher-rate or additional-rate band. These rates are significantly higher than the 10% and 20% rates that apply to other assets and investments (such as shares and unit trusts). The higher residential property rates reflect the Government's policy of discouraging short-term property speculation and ensuring property investors pay a fair share of tax. The gain is calculated as the sale proceeds (or market value if gifted) minus the acquisition cost (what you paid) and any allowable costs such as legal fees, estate agent fees, Stamp Duty Land Tax, and capital improvement costs. You cannot deduct general maintenance costs — those are deductible against rental income instead. If you sell a property at a loss, you can offset that loss against other gains in the same tax year or carry it forward to future years. Losses on residential property can only be offset against residential property gains, not gains on shares or other assets.

Annual Exempt Amount (£3,000)

The annual exempt amount for Capital Gains Tax in 2026/27 is £3,000 (reduced from £6,000 in 2024/25 and £12,300 in 2022/23). This means you only pay tax on gains above £3,000 in a tax year. If your total gains from all chargeable assets (including property, shares, and other assets) are £3,000 or less, you do not need to report them to HMRC or pay any CGT. Married couples and civil partners each have their own £3,000 annual exempt amount, meaning a couple can make combined gains of up to £6,000 without paying CGT, provided assets are held in joint names or transferred between them to utilise both allowances. The annual exempt amount cannot be carried forward — if you do not use it in a tax year, you lose it. It is also not available to companies or trusts (trusts have a separate, much lower allowance of £1,500). Given the reduction in the annual exempt amount from £12,300 to £3,000 over three years, many more property sales now trigger a CGT liability. Even relatively modest gains on a second home or buy-to-let property can now exceed the £3,000 threshold, so it is essential to calculate your gain accurately and report it within the required timeframe.

60-Day Reporting and PPD Return

If you sell a residential property in the UK that is not your main home and realise a capital gain, you must report the disposal to HMRC and pay any tax due within 60 days of completion (not exchange of contracts). This is done through the Property Disposal (PPD) return, an online form available through your Government Gateway account. The PPD return requires you to calculate the gain: sale proceeds minus acquisition cost, allowable costs, and any available reliefs (such as Principal Private Residence Relief or Letting Relief). You then estimate the total CGT due based on your income for the tax year and pay the tax within the 60-day window. If you also file a Self Assessment return for the tax year, you must include the property gain on that return as well, and the tax paid via the PPD return is credited against your overall tax liability for the year. HMRC has stated that it will not charge penalties for inaccuracies in the estimated tax calculation on the PPD return if you correct it when filing your Self Assessment, as long as you have made a genuine effort to calculate the tax correctly. If you fail to report the disposal within 60 days, HMRC can impose penalties: £100 for the first day of delay, then up to £300 or 5% of the tax due for longer delays, plus daily penalties of up to £60 per day.

Calculating the Gain

The chargeable gain on a property disposal is calculated as follows: start with the disposal proceeds (the sale price or market value if gifted), deduct the acquisition cost (the purchase price plus SDLT and legal fees at purchase), add any enhancement expenditure (capital improvements such as an extension, new kitchen, or new bathroom — not repairs or maintenance which are revenue expenses), and deduct allowable disposal costs (estate agent fees, legal fees on sale, and any advertising costs). The result is the chargeable gain before reliefs. From that figure, deduct any available reliefs: Principal Private Residence Relief (if the property was your main home at any time), Letting Relief (restricted to occasions where the property was your main home and let out), and the annual exempt amount (£3,000). The remaining gain is taxable at 18% or 24% depending on your income tax band. For example, if you bought a second home for £200,000 (plus £5,000 SDLT and £2,000 legal fees), sold it for £300,000 (less £5,000 estate agent fees and £2,000 legal fees), your total gain before reliefs is £86,000. After deducting the £3,000 exempt amount, you have £83,000 of chargeable gain. If you are a higher-rate taxpayer, the tax at 24% is £19,920.

Special Situations: Gifts, Inheritance, and Divorce

Several special situations affect CGT on property. Gifts: if you give a property away or sell it below market value, CGT is calculated on the market value, not the actual sale price. This prevents artificial loss creation. Inheritance: when you inherit a property, you acquire it at probate value (the market value at the date of death), not the original purchase price. This can mean a significant gain if you later sell the property for more than the probate value, but also means the pre-death gain escapes CGT entirely. Inheritance Tax: if the estate is liable to Inheritance Tax, the CGT base cost is the probate value, and IHT is paid on the estate value including the property. There is no CGT on death itself. Divorce or separation: transfers of property between spouses or civil partners who are separated are generally treated as no gain/no loss if the transfer occurs within certain timeframes. Transfers after the tax year of separation may be treated as disposals at market value. Professional advice is strongly recommended in any of these situations, as the interaction of CGT, Income Tax, SDLT, and Inheritance Tax can be complex, and the 60-day reporting deadline for UK property disposals applies in most cases.

FAQs

Do I pay CGT when I sell my main home?

No. Principal Private Residence Relief means you do not pay CGT on the sale of your main home, provided the property and garden (up to 0.5 hectares) have been used as your only or main residence throughout your ownership.

What is the deadline for reporting a property disposal to HMRC?

You must report and pay any CGT due within 60 days of completing the sale of a residential property that is not your main home. This is done through the online PPD return.

Can I deduct estate agent fees from the gain?

Yes. Estate agent fees, legal fees, and survey costs incurred when selling a property are allowable deductions in calculating the chargeable gain. Buying costs (SDLT, legal fees) are also deductible.

What happens if I sell a property at a loss?

You can offset the loss against other chargeable gains in the same tax year or carry it forward to future years. Losses on residential property can generally only be set against residential property gains.

Do I need to report a property disposal if my gain is below £3,000?

If your total chargeable gains for the tax year are below £3,000 and you do not need to file a Self Assessment return for other reasons, you do not need to report the disposal. If you do file a Self Assessment, you should still declare the gain.