Capital Gains Tax (CGT) on property is one of the most significant costs a UK property seller can face. With rates of 18% or 24% on residential property gains, understanding the rules — and the reliefs available — can save you thousands of pounds.
What Is Capital Gains Tax on Property?
CGT is charged on the profit you make when you sell an asset that has increased in value. For UK residential property, the gain is calculated as the sale price minus the original purchase price, minus allowable costs such as buying costs, selling costs, and capital improvements.
For the 2025/26 tax year, the rates are:
| Taxpayer Band | CGT Rate on Residential Property |
|---|---|
| Basic rate (income up to £50,270) | 18% |
| Higher or additional rate | 24% |
The first £3,000 of gains each year is covered by the Annual Exempt Amount and is tax-free. This was reduced from £12,300 in 2022/23 to £6,000 in 2023/24 and further to £3,000 in 2024/25, making planning more important than ever.
Principal Private Residence (PPR) Relief
The most powerful relief available is Principal Private Residence (PPR) relief. If the property has been your only or main home throughout the entire period of ownership, you pay no CGT at all.
If you lived in the property for only part of the time, you receive partial relief proportional to the period of occupation. Crucially, the last 9 months of ownership always qualify for PPR relief, even if you have already moved out — this is designed to help people who have moved into a new home before selling their old one.
Example: You owned a property for 60 months. You lived in it for 36 months, then rented it out for 24 months before selling. The last 9 months of the 24-month letting period qualify automatically, giving you 45 qualifying months out of 60 — meaning 75% of the gain is exempt.
Letting Relief
If you let out a property that was also your main home at some point, you may be able to claim letting relief. This relief is the lowest of three amounts:
- The amount of PPR relief you are entitled to
- The gain attributable to the letting period
- £40,000
Note that since April 2020, letting relief only applies if the owner was in shared occupancy with the tenant.
Allowable Costs That Reduce Your Gain
Many sellers underestimate the costs they can deduct from their gain. The following are allowable:
| Cost Type | Examples |
|---|---|
| Buying costs | Stamp Duty Land Tax, legal fees, survey fees |
| Selling costs | Estate agent commission, legal fees, EPC |
| Improvement costs | Extension, loft conversion, new kitchen (capital expenditure only) |
Routine repairs and maintenance do not qualify as improvement costs.
Timing Your Sale: Using the Annual Exempt Amount
If your gain is close to the £3,000 annual exempt amount, consider whether delaying the sale until the new tax year (6 April) could allow you to use two years' worth of exemptions.
For couples, each spouse or civil partner has their own annual exempt amount. Transferring a share of the property to a spouse before sale can effectively double the available reliefs — transfers between spouses are exempt from CGT.
The 60-Day Reporting Rule
Since October 2021, you must report and pay any CGT due on UK residential property within 60 days of completing the sale. This is done through HMRC's online Capital Gains Tax service. Failure to report on time results in automatic penalties and interest charges.
Non-Residents and UK Property
Non-UK residents are also subject to CGT on gains from UK residential property (since April 2015). Non-residents must report the disposal within 60 days regardless of whether a gain or loss is made.
Use Our Free Calculator
Our UK Capital Gains Tax on Property Calculator covers all the key reliefs — PPR, letting relief, annual exempt amount — and shows you the split between basic rate and higher rate tax based on your annual income.