Capital Gains Tax on Property UK 2026: Rates, Allowances & Reliefs
When you sell a UK property that isn't your main home, you may owe Capital Gains Tax on the profit. This guide covers the current rates, reliefs, calculation method, and reporting requirements for 2025-26.
What Is Capital Gains Tax?
Capital Gains Tax (CGT) is a tax on the profit (gain) you make when you sell or dispose of an asset that has increased in value. For property, the gain is the difference between what you paid for the property (plus allowable costs) and what you sell it for.
CGT applies to most residential property sales except your main home (which is exempt under Private Residence Relief). This means buy-to-let properties, second homes, holiday homes, inherited properties that are not your residence, and commercial property are all potentially subject to CGT.
CGT on residential property has become a more significant consideration for investors following increases to the higher rate from 20% to 24% (effective from October 2024) and the reduction of the annual exempt amount from £12,300 (2022-23) to just £3,000 (2024-25 onwards).
CGT Rates on Residential Property
| Tax Band | Residential Property Rate | Other Assets Rate |
|---|---|---|
| Basic rate (income up to £50,270) | 18% | 10% |
| Higher rate (income £50,271–£125,140) | 24% | 20% |
| Additional rate (income above £125,140) | 24% | 20% |
Rates for 2025-26 tax year. The gain is added on top of your income to determine which rate applies.
Annual Exempt Amount
Every individual has an Annual Exempt Amount (AEA) - the amount of capital gains you can make each tax year before CGT is due.
| Tax Year | AEA (Individual) |
|---|---|
| 2022-23 | £12,300 |
| 2023-24 | £6,000 |
| 2024-25 onwards | £3,000 |
For couples who jointly own a property, each person can use their own AEA against their share of the gain, providing £6,000 of combined tax-free gains. The AEA cannot be carried forward to future years - if you don't use it, you lose it.
Calculating Your CGT Bill
The calculation follows a clear structure:
- Sale price - what you received for the property
- Minus purchase price - what you originally paid
- Minus allowable costs - stamp duty paid on purchase, solicitor fees (buying and selling), estate agent fees, surveyor costs
- Minus improvement costs - extensions, renovations that added value (not repairs or maintenance)
- = Total gain
- Minus Annual Exempt Amount (£3,000)
- Minus any reliefs (PRR, lettings relief)
- = Taxable gain
- Apply CGT rate (18% or 24%) based on your income tax band
Worked Example
- Purchase price: £200,000
- Sale price: £300,000
- Buying costs (SDLT + solicitor): £8,500
- Selling costs (agent + solicitor): £6,000
- Kitchen renovation: £15,000
- Gross gain: £300,000 - £200,000 - £8,500 - £6,000 - £15,000 = £70,500
- Less AEA: £70,500 - £3,000 = £67,500 taxable gain
- CGT at 24% (higher-rate taxpayer): £16,200
Private Residence Relief (PRR)
Private Residence Relief (PRR) exempts gains on the sale of your main home from CGT. If the property has been your only or main residence throughout your ownership, the entire gain is exempt.
If you lived in the property for part of the ownership period and rented it out for the rest, PRR is calculated proportionally based on time. The final 9 months of ownership are always deemed to be occupied, even if you have already moved out.
Example: Partial PRR
You owned a property for 10 years. You lived in it for 6 years, then rented it for 4 years (but the final 9 months count as occupation). PRR covers 6 years + 9 months = 6.75 years out of 10 = 67.5% of the gain is exempt.
Lettings Relief
Since April 2020, lettings relief is only available if you shared occupation of the property with your tenant (i.e., you lived in the property at the same time as the tenant). The relief is the lower of: £40,000, the amount of PRR, or the gain attributable to the letting period.
In practice, this change means lettings relief is now unavailable for most landlords who moved out before renting the property. Before April 2020, the relief was available to anyone who let a property that had previously been their main home, making this a significant loss for landlords selling former homes.
Reporting & Payment Deadlines
- 60-day reporting: UK residents must report the disposal and pay estimated CGT within 60 days of completion using HMRC's online CGT on property service.
- Self-assessment: The gain must also be reported on your self-assessment tax return for the relevant tax year. Any CGT already paid is credited against the final liability.
- Penalties: Late filing attracts an initial penalty of £100, rising to daily penalties of £10/day after 3 months, and further penalties after 6 and 12 months.
- Interest: HMRC charges interest on late payments from the due date (60 days after completion).
CGT Planning Strategies
Use both spouses' allowances
Jointly owning a property allows both partners to use their £3,000 AEA and potentially their basic-rate band. Transferring a share to a spouse before sale is a CGT-free transaction.
Time disposals across tax years
If you're selling multiple properties, spreading sales across different tax years uses the AEA multiple times and may keep gains within lower tax bands.
Maximise allowable costs
Keep records of all improvement expenditure (extensions, structural work, new kitchens/bathrooms). These reduce the taxable gain. Note: repairs and maintenance are not deductible for CGT.
Consider incorporation timing
Transferring property to a company triggers CGT at current values. If planning to incorporate, consider timing to optimise the gain against available reliefs and allowances.
Frequently Asked Questions
No, if the property has been your only or main residence for the entire period of ownership, it is fully exempt from CGT under Private Residence Relief (PRR). If the property was your main home for part of the time and rented out for part, you may receive partial relief. The last 9 months of ownership are always treated as occupation, even if you have moved out.
PropertyWiki Team
Editorial Team
Published: April 7, 2026
Updated: April 7, 2026
PropertyWiki's editorial team provides data-driven property investment analysis and guides for UK buyers and investors.