Capital gains tax in the UK for property: Complete guide
Capital gains tax (CGT) may be due when you sell UK property that is not fully covered by Private Residence Relief (for example, a second home or buy-to-let). For disposals from 6 April 2025 (2025/26), residential property gains are taxed at 18% or 24%. The annual exempt amount is £3,000.
CGT usually comes up on not your home sales (second homes, buy-to-let, inherited property) – selling your main home is often exempt only if you meet the Private Residence Relief conditions.
- 2025/26 CGT rates and annual allowance: for gains from 6 April 2025, residential property gains are taxed at 18% or 24%, depending on your income band; the annual exempt amount is £3,000.
- 60-day reporting deadline: if CGT is due on UK residential property, it requires reporting and paying within 60 days when completion is on/after 27 October 2021. Non-residents must report disposals by the deadline even if no tax is due.
- Do I pay CGT when I sell my main home? Usually, no, if you meet Private Residence Relief conditions; otherwise, you may owe some CGT.
- What’s the reporting deadline? 60 days for UK residential property CGT due where completion is on/after 27 October 2021.
- What costs can I deduct? Buying/selling fees (estate agent/solicitor) and qualifying improvement works; normal maintenance (like decorating) does not count.
This guide covers CGT rates, annual allowance, Private Residence Relief for main homes, CGT on second homes and buy-to-let properties, and the 60-day reporting deadline.
What is the capital gains tax on UK property?
Capital gains tax (CGT) on UK property is a tax on the profit you make when you sell, gift, or transfer property in the UK. Capital gains tax UK property rules apply to residential property and commercial property that is not your primary residence.
You pay tax on the gain – the sale price minus the purchase price and allowable costs – not on the total sale amount.
Also read. Tax guide for Americans in the UK
When CGT applies to UK property
CGT applies to:
- Second homes and holiday properties
- Buy-to-let rental residential property
- Inherited property you do not live in as your main home
- Commercial property
CGT does not usually apply to:
- Your main residence (generally exempt under Private Residence Relief)
- Property sold at a loss
- Gains within the £3,000 annual allowance
How to calculate capital gains tax on residential property
To calculate your gain:
Sale price
minus original purchase price
minus allowable costs (such as stamp duty, legal fees, estate agent fees, and qualifying improvement costs)
= your capital gain
Then:
- Deduct the £3,000 annual allowance
- Apply the appropriate CGT rate – 18% or 24% – to the remaining taxable gain
This is the basic framework for how capital gains tax on UK property rules work in practice.
CGT rates for UK property (2025/26)
For the 2025/26 tax year, CGT rates on UK residential property are 18% for basic rate taxpayers and 24% for higher/additional rate taxpayers. Your rate depends on your taxable income. If your taxable income plus gain exceeds the basic rate limit (£37,700), you pay the higher 24% rate on the amount above the limit.
How to determine your rate:
Add your taxable income and property gain together.
- If the combined total is under £37,700 (basic rate limit), pay 18% CGT.
- If the combined total exceeds £37,700, pay 18% on the portion within the basic rate limit and 24% on the portion above.
Example: £40,000 income + £20,000 gain = £60,000 total. First £10,270 of gain at 18%, remaining £9,730 at 24%.
NOTE! Residential property CGT rates changed from 18%/28% to 18%/24% for disposals on or after 6 April 2024. From 30 October 2024, non-residential (commercial) disposals moved from 10%/20% to 18%/24%.
Annual CGT allowance
The annual CGT allowance for 2025/26 is £3,000 per person. You only pay CGT on gains exceeding this amount. Married couples and civil partners each have separate £3,000 allowances (£6,000 combined total) if both names are on the property title.
Allowable costs you can make deductions from before calculating CGT:
- Original purchase price
- stamp duty paid on purchase
- solicitor and legal fees (buying and selling)
- estate agent fees on sale
- improvement costs (extensions, conversions, loft conversions – NOT repairs or maintenance)
- valuation fees for CGT calculation purposes
Deduct these costs to reduce your taxable gain before applying the £3,000 allowance.
Private Residence Relief (main home exemption)
Private Residence Relief (PRR) exempts your main residence from CGT. If you lived in the property as your only or main home throughout ownership, you pay zero CGT when you sell, regardless of the gain amount. This is the most valuable CGT relief available. There is no limit to the relief.
Full relief requirements
To qualify for full PRR:
- Property must be your only or main residence throughout ownership
- You have not been absent other than for an allowed period of absence (or because you were living in job-related accommodation)
- Garden or grounds (including buildings on them) are not greater than the permitted area (if they do not exceed half a hectare – 5,000 square meters – all of it qualifies)
Partial relief
If you didn't live in the property full-time, you get partial relief calculated as:
(Months that qualify as your only or main residence Total months owned) Gain = Tax-free amount.
The final 9 months of ownership always count as residence as long as the property was your only or main residence at some point.
Example: Owned 120 months, lived in 60 months + 9 final = 69/120 = 57.5% exempt from CGT
CGT on second homes and investment property
Second homes and investment properties usually do not qualify for Private Residence Relief (PRR) unless they were your main residence for some of the time and, where relevant, you nominated them. You’ll pay CGT on second homes at 18% or 24%, after deductible costs and the £3,000 Annual Exempt Amount (annual allowance).
Second homes specifically
A second home is any residential property (a second property) you own in addition to your primary residence.
Common examples:
- Holiday cottage or beach house (a holiday home)
- property in a different city for work purposes
- property purchased for children to live in
- inherited family home you keep but don’t live in
CGT calculation: Sale price – original purchase price – improvement costs minus buying/selling fees.
You cannot claim PRR unless it was your main residence for some or all of the time (and, if you have more than one home, you can nominate one property as your main residence at a time).
Buy-to-let and rental property
Buy-to-let properties purchased as investments are fully taxable on capital gains – this is the core of rental property CGT.
What you can deduct:
- Purchase price and stamp duty,
- improvement costs (extensions, renovations, conversions – not normal maintenance costs),
- legal and estate agent fees, costs of obtaining title
What you CANNOT deduct:
Mortgage interest and other loan interest, repair and maintenance costs (generally not capital improvement costs), furniture and appliances (unless they are fixtures that form part of the property, rather than separate chattels).
CGT calculation examples
Here’s how CGT on a second home works in practice. This example assumes the property does not qualify for Private Residence Relief and the seller is a higher-rate taxpayer in the 2025/26 tax year.
Example of a second home sale
- Purchase price (2016): £250,000
- Sale price (2026): £400,000
- Stamp duty: £7,500
- Extension cost: £30,000
- Legal and estate agent fees: £8,000
Step 1: Calculate the gross gain
| Item | Amount |
|---|---|
| Sale price | £400,000 |
| Minus: purchase price | £250,000 |
| Minus: stamp duty | £7,500 |
| Minus: extension cost | £30,000 |
| Minus: legal and agent fees | £8,000 |
| Gross gain | £104,500 |
Step 2: Apply the annual allowance and CGT rate
| Item | Amount |
|---|---|
| Gross gain | £104,500 |
| Minus: annual allowance (Annual Exempt Amount) | £3,000 |
| Taxable gain | £101,500 |
| CGT due at 24% higher rate | £24,360 |
In this scenario, the capital gain is £104,500. After deducting the £3,000 annual allowance, the taxable gain is £101,500. At the 24% higher rate for residential property, the CGT due would be £24,360.
60-day reporting and payment deadline
You must report and pay UK property CGT by the 60-day deadline (the reporting deadline and payment deadline) – 60 days from the completion date (not exchange date). This applies to all UK residential property sales with taxable gains. File online using the UK Property Disposal Return. Late filing or payment results in penalties and interest charges.
Reporting process:
- Complete property sale (day 0 = completion date)
- Calculate CGT due within 60 days
- Register for the UK Property Disposal Return on the HMRC website
- Complete online return showing sale details and CGT calculation
- Pay CGT electronically by bank transfer or debit card
- Receive confirmation from HMRC. Also report on annual Self Assessment, but payment must be made within 60 days.
NOTE! Penalties for late filing are
- £100 immediate penalty if filed late
- daily penalties after 3 months
- increased penalties after 6+ months
Interest is charged on late payment from the due date at HMRC rates.
| Scenario | Purchase Price | Sale Price | Allowable Costs | Gross Gain | Allowance | Taxable Gain | CGT Rate | Tax Due |
|---|---|---|---|---|---|---|---|---|
| Main Residence (PRR) | £300,000 | £500,000 | £10,000 | £190,000 | N/A | £0 | N/A | £0 |
| Second Home (basic) | £200,000 | £350,000 | £8,000 | £142,000 | -£3,000 | £139,000 | 18% | £25,020 |
| Buy-to-let (higher) | £180,000 | £280,000 | £12,000 | £88,000 | -£3,000 | £85,000 | 24% | £20,400 |
| Inherited Property | £150,000* | £320,000 | £6,000 | £164,000 | -£3,000 | £161,000 | 24% | £38,640 |
Inherited property basis = market value at date of death, not original purchase price by deceased.
NOTE! Allowable costs include stamp duty, legal fees, estate agent fees, and improvement costs (extensions, conversions). Higher rate (24%) applies if income plus gains exceed the £37,700 basic rate band for the 2025/26 tax year.
Key takeaways
UK property CGT – Key facts 2025/26:
- Rates: 18% basic rate / 24% higher rate.
- Allowance: £3,000 per person per year.
- Deadline: Report and pay within 60 days.
- Main residence: Usually exempt (PRR).
- Second homes: Fully taxable.
- Recent change: Rates increased in October 2024 from 10%/20% to 18%/24%.
Navigating capital gains tax in the UK for property can be complex – especially if you’re an American balancing UK property CGT rules with US reporting requirements. Taxes for Expats helps US citizens in the UK accurately coordinate their UK and IRS filings to reduce double taxation and avoid costly mistakes.
FAQ
CGT on UK residential property is 18% if your taxable income plus gains stay within the basic rate band, and 24% for the higher rate band – these CGT rates apply to your capital gain after the annual allowance (£3,000 for the 2025/26 tax year). This is part of UK property CGT and wider UK property taxation. Main residences are usually exempt under Private Residence Relief (PRR).
Usually no. Your main residence is usually exempt from CGT under Private Residence Relief (PRR) if it was your only or main residence for at least part of the ownership. If it was not your only or main residence for all of the time, you normally apportion the gain and may only get partial relief. Letting Relief is only available in limited cases (for example, where you lived in the property at the same time as tenants).
You must file a UK Property Disposal Return and pay any CGT due to HMRC within 60 days – the 60–day deadline runs from the completion date (not the exchange date).
Yes. Capital losses from other assets (stocks, other properties) can offset property gains in the same tax year. Unused losses carry forward indefinitely to future years.
Each spouse has a separate £3,000 allowance (£6,000 combined) if you both own a share of the property. Transfers between spouses are CGT-free.
Second homes (including a buy-to-let, investment property or rental property) are generally subject to CGT at 18% or 24%. PRR may apply only for any period the property qualified as your only or main residence. Calculate gain as sale price minus purchase price minus improvement costs and fees, then deduct the £3,000 annual allowance.
Deductible costs include: purchase price, Stamp Duty Land Tax, legal and estate agent fees on purchase and sale, improvement costs (extensions, conversions – not repairs), and valuation fees. You cannot deduct mortgage interest.
If you sell UK residential property, you may have UK CGT to pay, whether you’re UK resident or non-resident (UK tax is based on residence rules, not citizenship). US citizens and residents may also have a US reporting obligation, and may be able to claim a Foreign Tax Credit for qualifying UK tax to help reduce double taxation.
No CGT is due on property sold at a loss. The loss can offset other capital gains in the same year or be carried forward.
Inherited property’s CGT basis is normally the market value at the date of death. CGT applies when you later sell it (unless you live in it as your main residence).
