Tax

Capital Gains Tax on Property UK 2026 — Second Homes & Buy-to-Let

How capital gains tax works on UK property sales. CGT on second homes, buy-to-let, inherited property, and land. Calculate your bill and learn how to reduce it legally.

By PocketWise · · 6 min read

Tax information is based on HMRC rules for the 2026/27 tax year. Tax rules can change — always verify current rates at GOV.UK. This is not tax advice. Consider consulting a qualified tax adviser for your personal situation.

Selling a property other than your main home usually means paying Capital Gains Tax. Here’s how it works and how to minimize your bill.

CGT Rates on Property 2026-27

Taxpayer Status CGT Rate
Basic rate (income up to £37,700) 18%
Higher rate (income above £37,700) 24%
Additional rate 24%

These are the same rates that applied to property before October 2024 — other assets have now been aligned to these higher rates.

When CGT Applies to Property

Taxable Property

Property Type CGT Applies?
Second home Yes
Buy-to-let Yes
Holiday home Yes
Inherited property (not your home) Yes
Land Yes
Overseas property Yes (UK residents)

Exempt Property

Property Type CGT Status
Main residence Exempt (PRR)
Property in ISA (REITs) Exempt
Property passing on death Exempt (IHT may apply)

Calculating CGT on Property

Step-by-Step

Step Calculation
1 Sale price
2 Minus purchase price
3 Minus buying costs
4 Minus selling costs
5 Minus improvement costs
6 = Gross gain
7 Minus losses
8 Minus annual allowance (£3,000)
9 = Taxable gain
10 Apply CGT rate

Allowable Costs

Deductible (Buying) Amount
Stamp duty Full amount
Solicitor fees Full amount
Survey fees Full amount
Estate agent (if you paid) Full amount
Deductible (Selling) Amount
Estate agent fees Full amount
Solicitor fees Full amount
Marketing costs Full amount
EPC certificate Full amount
Deductible (During Ownership) Amount
Extension Full amount
Loft conversion Full amount
New kitchen/bathroom Full amount
Central heating installation Full amount
Structural repairs Full amount
NOT Deductible Notes
Mortgage interest Not capital expenditure
Regular maintenance Repairs, not improvements
Furniture Unless sold with property
Your time No deduction

Worked Examples

Example 1: Buy-to-Let Sale

Item Amount
Purchase (2015)
Price £200,000
Stamp duty £7,500
Legal/survey fees £2,000
Total cost base £209,500
Improvements (2018)
Extension £30,000
New bathroom £8,000
Total improvements £38,000
Sale (2026)
Price £350,000
Estate agent (1.5%) £5,250
Legal fees £1,500
Net proceeds £343,250
CGT Calculation
Net proceeds £343,250
Minus cost base £209,500
Minus improvements £38,000
Gross gain £95,750
Minus annual allowance £3,000
Taxable gain £92,750
CGT at 24% (higher rate) £22,260

Example 2: Second Home — Basic Rate Taxpayer

Item Amount
Sale proceeds (net of costs) £180,000
Purchase cost (including costs) £120,000
Improvements £15,000
Gross gain £45,000
Annual allowance £3,000
Taxable gain £42,000
Income: £35,000
Basic rate band remaining £2,700
Gain at 18% £486
Gain at 24% £9,432
Total CGT £9,918

Private Residence Relief (PRR)

Full Relief Conditions

Condition Requirement
Occupation Lived in as your home
Throughout ownership From purchase to sale
Only/main home One home at a time
Grounds Under 5,000 sqm (1.24 acres)

Partial Relief — Period of Occupation

If you didn’t live there throughout:

Period Treatment
Lived in Full relief
Last 9 months Full relief (even if not living there)
Away for employment anywhere (up to 4 years) Full relief
Away for UK employment Full relief (unlimited)
Absent other reasons No relief

PRR Calculation Formula

Relief = Total Gain × (Qualifying Months ÷ Total Months Owned)

Example: Partial PRR

Detail Period
Owned 10 years (120 months)
Lived in 6 years (72 months)
Let out 4 years (48 months)
Last 9 months Qualify regardless
Calculation Amount
Total gain £100,000
Qualifying period 72 + 9 = 81 months
PRR relief £100,000 × (81 ÷ 120) = £67,500
Taxable gain £32,500
Annual allowance £3,000
Final taxable £29,500

Lettings Relief

When It Applies

Condition Requirement
Period Let out as residential accommodation
PRR period Also lived there at some point
Maximum £40,000

Lettings Relief Calculation

The relief is the lowest of:

  • PRR amount for letting period
  • £40,000
  • Gain from letting period

Example: Lettings Relief

Detail Amount
Total gain £100,000
Let period gain £40,000
PRR on let period £0
Lettings Relief available Lower of £40,000/£40,000/£0
Lettings Relief £0

Important: Lettings Relief is now limited — it only really helps if you shared the property with tenants.

Inherited Property

Base Cost for Inherited Property

Scenario Base Cost
Inherited property Market value at death
Probate valuation Usually accepted
Sale soon after death Little/no CGT
Hold and sell later CGT on gain since death

Example: Inherited and Sold

Item Amount
Inherited value (probate) £250,000
Sale price (3 years later) £300,000
Selling costs £6,000
Gain £44,000
Annual allowance £3,000
Taxable £41,000
CGT at 24% £9,840

If You Move Into Inherited Property

Action CGT Result
Move in as main home Future gain exempt (PRR)
Sell immediately CGT on gain since death
Let then sell CGT on let period

Joint Ownership

Married Couples/Civil Partners

Rule Detail
Each has £3,000 allowance Combined £6,000
Transfer between spouses No CGT triggered
Joint ownership Each taxed on their share
Main home Only one PRR between you

Example: Couple Selling Buy-to-Let

Detail Amount
Owned 50/50
Total gain £80,000
Each person’s gain £40,000
Each person’s allowance £3,000
Each person’s taxable £37,000
Total taxable £74,000

Non-Married Joint Owners

Situation Tax Treatment
Unequal shares Taxed on actual share
No allowance transfer Each has own £3,000
Sale to each other CGT at market value

60-Day Reporting Rule

Who Must Report

Situation Must Report?
UK residential property with gain Yes
UK residential property with loss Required (to claim loss)
Main home (full PRR) No
Non-residential property No (use Self Assessment)

How to Report

Step Action
1 Create Government Gateway account
2 Access UK Property Account
3 Enter property and transaction details
4 Calculate gain (HMRC helps with calculator)
5 Pay tax owed
6 Keep confirmation

Deadlines

Event Deadline
Completion date Day 0
Report and pay Day 60
Late report Penalties start

Penalties for Late Reporting

How Late Penalty
Up to 6 months £100
6-12 months £300 or 5% of tax
12+ months £300 or 5% of tax
Interest From day 61

Reducing CGT on Property

Strategy 1: Use Both Allowances (Couples)

Before After
Property in one name Transfer 50% to spouse
One £3,000 allowance Two £3,000 allowances
Saving Up to £720 (24% of £3,000)

Strategy 2: Time the Sale

Timing Benefit
Early in tax year Use this year’s allowance
If gain is huge Split over two tax years

Strategy 3: Maximize Deductible Costs

Review Check
Purchase costs Stamp duty, legal, survey
Improvements Extensions, kitchens, structural
Sale costs All agent and legal fees

Strategy 4: Use Losses

Action Effect
Sell loss-making asset Creates loss
Offset against property gain Reduces tax
Carry forward unused For future years

Strategy 5: Pension Contributions

Action Effect
Make pension contribution Extends basic rate band
More gain taxed at 18% Instead of 24%

Capital Gains Tax Reliefs for Property

Working Away

Relief Requirement
4-year employment absence Full PRR
UK employment Unlimited absence with PRR
Job location/requirement Must be employment-related

Transferring Main Home Status

Scenario Action
Own two properties Nominate which is main home
Deadline 2 years from acquiring second
Can be retrospective Within 2 years

Marriage/Separation

Situation Treatment
Transfer on separation No CGT (within certain period)
Divorce settlement May have CGT implications
Get professional advice Complex area

Common Property CGT Questions

What If Property Prices Fall?

Scenario Treatment
Sell at a loss No CGT
Report the loss Within 4 years
Carry forward Offset against future gains

CGT on Overseas Property

Rule Application
UK resident Pays UK CGT on worldwide gains
Foreign tax paid May claim relief
Exchange rate gains Taxable

Gifting Property

Gift To CGT Treatment
Spouse No CGT
Child CGT on market value
Charity No CGT
Below market value CGT on market value

Sources

  1. GOV.UK — Capital Gains Tax on Property
  2. GOV.UK — Private Residence Relief