By the UKPropertyCalculator team • Published 21 September 2026
CGT on property catches more people off guard than stamp duty. At least with stamp duty you can see it coming — it appears on your completion statement and you hand over the money that day. Capital gains tax turns up weeks after you've sold, on a gain you'd already mentally spent, with a 60-day deadline most sellers didn't know existed. Some landlords receive penalty notices before they have even realised they needed to file anything.
This guide covers exactly what you pay, what you can deduct, and what happens if you don't report on time. It is aimed at people selling a buy-to-let, second home, or any UK residential property that isn't their main home.
Capital Gains Tax applies when you sell or otherwise dispose of a UK residential property that is not your main home. The most common situations are:
Your main home is exempt — Private Residence Relief (PRR) means the gain on your only or main residence is not chargeable. The catch is "main residence." If you own multiple properties, HMRC expects you to have formally nominated one as your principal private residence. If you haven't, they will decide, and they may not agree with your expectation.
Residential property used to carry its own, higher CGT rates. It no longer does. The 2024 Autumn Budget cut the residential higher rate from 28% to 24% and lifted the main rates on shares and other assets to match, so from 30 October 2024 everything an individual sells is taxed on the same two-rate scale:
| Your income tax position | CGT rate on residential property |
|---|---|
| Basic-rate taxpayer (taxable income up to £50,270) | 18% |
| Higher- or additional-rate taxpayer (above £50,270) | 24% |
There's an important wrinkle here. If you're a basic-rate taxpayer but your capital gain pushes your total income over the higher-rate threshold (£50,270 in 2026/27, unchanged since 2021/22), the portion of the gain that sits above the threshold is taxed at 24%, not 18%. You may find yourself paying both rates on the same disposal.
The higher rate was reduced from 28% to 24% at the 2024 Autumn Budget. That change was effective immediately — properties completing on or after 30 October 2024 use the 24% rate. If you have a disposal that completed before that date and haven't yet filed, check with an accountant before assuming the old 28% figure.
Source: HMRC Capital Gains Tax rates. Always verify current rates before filing — these can change at each Budget.
Every individual has an annual CGT exempt amount — a tax-free allowance that reduces your chargeable gain before the rates above apply. For 2026/27 it is £3,000, the same figure that has applied since 2024/25.
That figure needs context. As recently as 2022/23 the annual exempt amount was £12,300. It was halved to £6,000 for 2023/24, then halved again to £3,000. On any meaningful property gain it is now close to a rounding error: it saves a higher-rate taxpayer £720 (£3,000 × 24%), which on a £50,000 gain takes the bill from £12,000 to £11,280. Useful, but not a plan. Don't let the allowance make you complacent about the total liability.
The practical use of the annual exempt amount is in timing and structure. If you're selling a property jointly with a spouse or civil partner, you each have your own £3,000 allowance — so a joint disposal gets £6,000 exempt before any tax. For an unmarried couple, ownership structure matters enormously: both partners' allowances are available if both are named on the title.
The gain HMRC taxes is not simply "selling price minus buying price." It's the net proceeds minus the net acquisition cost, with a series of allowable deductions applied to both sides. Getting these deductions right can meaningfully reduce your bill.
This is the rule that generates the most penalty notices. The regime started in April 2020 with a 30-day window, extended to 60 days for completions on or after 27 October 2021. When you sell (or otherwise dispose of) UK residential property and CGT is due, you must:
That's 60 days from completion — not exchange, not when you receive the proceeds, not when your solicitor transfers the money. The clock starts the day the transaction legally completes.
Miss the deadline and the penalty regime is the one in Schedule 55 of the Finance Act 2009 — the same framework used for late tax returns generally. The stages are:
Note what that means for a small gain. The two £300 amounts are floors, not percentages. Suppose you file eighteen months late on a disposal where £900 of CGT was due: the penalties come to £700 — £100, then £300, then £300 — which is more than three quarters of the tax, before interest.
If there is genuinely no CGT to pay — the annual exempt amount covered the gain, or you made a loss — a UK resident does not have to file the 60-day property return at all. You may still need to report the disposal on a self-assessment return, for instance to bank a loss for future years or because your gains or total proceeds exceed the self-assessment reporting limits. If you're not certain your gain is nil, file the 60-day return: the £100 penalty applies whether or not tax was due.
Here's a realistic scenario. Sarah bought a two-bed flat in 2019 for £200,000 as a buy-to-let — she already owned her own home, so the 3% additional-dwelling surcharge applied on top of the standard rates. She is a higher-rate taxpayer. In 2026, she sells the flat for £310,000. During ownership she added a loft bedroom (£25,000 of work, signed off by building control). Here's how the calculation works:
| Item | Amount |
|---|---|
| Sale proceeds | £310,000 |
| Less deductions: | |
| Original purchase price | − £200,000 |
| SDLT paid at acquisition (2019, incl. 3% surcharge) | − £7,500 |
| Purchase legal fees | − £1,500 |
| Loft conversion (capital improvement) | − £25,000 |
| Estate agent fee on sale (1.5%) | − £4,650 |
| Sale legal fees | − £1,200 |
| Net chargeable gain | £70,150 |
| Annual exempt amount (2026/27) | − £3,000 |
| Taxable gain | £67,150 |
| CGT at higher rate (24%) | £16,116 |
At the basic rate (18%), the same gain would produce a bill of £12,087. The difference of £4,029 between the two rates illustrates why timing a disposal in a lower-income year can matter.
One line in that table is worth dwelling on. Sarah's £7,500 of SDLT breaks down as £1,500 of standard duty (0% on the first £125,000, 2% on the next £75,000) plus £6,000 of additional-dwelling surcharge, which was 3% of the whole price in 2019. Every pound of it is deductible. Had she forgotten the surcharge and only claimed the £1,500, she would have handed HMRC an extra £1,440 in CGT. The surcharge is 5% now, so the same £200,000 flat bought today would carry £11,500 of SDLT — and an even larger deduction on the way out. Keeping your original completion statement is not optional admin; it's worth real money years later.
To make this more concrete, here's what CGT looks like on a range of chargeable gains (after deductions and the annual exempt amount), at both rates:
| Net chargeable gain (after £3k AEA) | CGT at 18% (basic rate) | CGT at 24% (higher rate) |
|---|---|---|
| £20,000 | £3,600 | £4,800 |
| £40,000 | £7,200 | £9,600 |
| £60,000 | £10,800 | £14,400 |
| £80,000 | £14,400 | £19,200 |
| £100,000 | £18,000 | £24,000 |
| £150,000 | £27,000 | £36,000 |
Use both partners' allowances. If you own the property jointly with a spouse or civil partner, the gain is split between you and each of you applies your own £3,000 exempt amount and pays at your own marginal rate. If one partner is a basic-rate taxpayer, their share is taxed at 18% rather than 24% — a meaningful saving on a large gain.
Get your improvement costs documented. The HMRC rules on capital versus revenue expenditure are genuinely not always clear-cut. Get invoices, planning permissions, and building regulations certificates for any significant work. If an improvement cost is disputed and you can't evidence it, HMRC will disallow it.
Consider timing relative to the tax year. If you're close to the higher-rate threshold in a given year — perhaps because you're taking early retirement or reducing your hours — selling in a lower-income year means a larger portion of the gain is taxed at 18% rather than 24%. This requires planning ahead.
There is no Business Asset Disposal Relief on residential property. Landlords sometimes ask about BADR (formerly Entrepreneurs' Relief). It does not apply to residential rental property held personally, and it is no longer the bargain it was: the BADR rate was 10% up to 5 April 2025, 14% for 2025/26, and 18% for disposals from 6 April 2026 — the same as the basic-rate CGT rate. A furnished holiday let used to qualify, but the FHL regime was abolished from April 2025.
Modelling the full tax picture before you sell?
Our Rental Yield Calculator helps you assess gross and net yield on any UK property, and our Buy-to-Let ROI guide covers the full profitability picture including tax.
Compare Buying vs Renting →CGT is only one part of the tax burden on a buy-to-let property. During the years of ownership, income from rent is subject to income tax — and higher-rate landlords holding properties personally are also caught by Section 24, which restricts the mortgage interest deduction to a basic-rate tax credit. Our Section 24 analysis found that a higher-rate personal landlord is cash-flow negative after tax in all 30 cities tested in England and Wales at current average rents, prices and mortgage rates.
The interaction between income tax on rent and CGT on disposal matters for your overall return. A property that generates modest rental income taxed at 40% and then a large gain taxed at 24% may still outperform other assets on a total return basis — but you need to model both sides together, not look at each in isolation. The Buy-to-Let ROI guide covers this in more detail.
No — Private Residence Relief (PRR) exempts your only or main home from CGT in full, provided you lived there throughout your ownership. Where you have let the property or had periods of absence, PRR may be only partial. Always declare the disposal on your self-assessment return; the exemption does not mean the transaction is invisible to HMRC.
60 days from the completion date, using HMRC's online Capital Gains Tax on UK Property account. Miss it and a £100 penalty applies from day 61, with further penalties of 5% of the tax or £300 (whichever is greater) at six and twelve months, plus interest on anything unpaid.
18% for basic-rate taxpayers, 24% for higher- and additional-rate taxpayers, on gains from UK residential property disposals. These rates have applied since 30 October 2024. Verify the current rates at gov.uk/capital-gains-tax before you file, as they can change at any Budget.
Yes — SDLT paid at acquisition is an allowable cost that reduces your capital gain. This includes the additional dwelling surcharge if you paid it. On a buy-to-let bought at £300,000 with a 5% surcharge, that's £20,000 reducing your eventual gain. Keep your original completion statement.
Short of PRR (main home) or holding in a pension structure (not possible for residential property), there's no mechanism to eliminate CGT on an investment property. You can reduce it by maximising deductions, using both partners' annual allowances, timing the sale to a lower-income year, or transferring an interest to a spouse before disposal (professional advice essential). HMRC takes a dim view of arrangements that have no purpose other than avoiding tax.
Sources: HMRC Capital Gains Tax rates, HMRC 60-day reporting guidance, Schedule 55 Finance Act 2009 (late filing penalties), HMRC CG15250 (allowable incidental costs), Finance Act 2019 Schedule 2 (60-day rule). Rates and allowances cited are those for 2026/27 — verify current figures at gov.uk before filing. This article is for information only and does not constitute financial or tax advice. See our Disclaimer.