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.
This article is for informational purposes only and does not constitute tax advice. Always consult a qualified tax adviser for your specific circumstances.
CGT Rates for Residential Property (2025/2026)
Capital Gains Tax on residential property in the UK is charged at higher rates than other assets:
| Tax Band | Rate (Residential Property) | Rate (Other Assets) |
|---|---|---|
| Basic rate taxpayer | 18% | 10% |
| Higher rate taxpayer | 24% | 20% |
These rates apply after deducting the Annual Exempt Amount (AEA), which for 2025/26 is £3,000 per individual (reduced from £6,000 in 2023/24 and £12,300 in 2022/23).
Principal Private Residence Relief (PPR)
Your main home is exempt from CGT when you sell it, provided:
- It has been your only or main residence throughout ownership
- The garden/grounds don't exceed 0.5 hectares (unless larger grounds are required for reasonable enjoyment)
- No part of the property has been used exclusively for business
Partial PPR: If you lived in the property for part of the ownership period, relief is proportional. The last 9 months of ownership always qualify for PPR (previously 18 months, reduced in 2020).
Letting Relief: If you let out a property that was previously your main residence, you may claim Letting Relief of up to £40,000 per owner (£80,000 for a couple). This only applies if you occupied the property as your home at the same time as the tenant.
Calculating the Gain
The taxable gain is calculated as:
Sale price minus Purchase price minus Allowable costs minus Annual Exempt Amount
Allowable costs include:
- Stamp Duty Land Tax paid on purchase
- Legal fees (buying and selling)
- Estate agent fees on sale
- Cost of improvements (NOT maintenance or repairs)
- Survey and valuation fees
Important distinction: Improvements that enhance the property's value (extensions, conversions, new bathrooms) are deductible. Repairs that restore the property to its original condition (fixing a roof, repainting) are NOT deductible for CGT purposes (though they may be deductible against rental income).
Reporting and Payment Deadlines
Since April 2020, UK residents must report and pay CGT on residential property disposals within 60 days of completion (previously 30 days, extended in 2022). Late filing attracts penalties:
- Up to 6 months late: £100 fixed penalty
- 6-12 months late: £300 or 5% of tax due (whichever is greater)
- Over 12 months: £300 or 100% of tax due
Non-UK residents must report ALL UK property disposals within 60 days, regardless of whether a gain or loss arises.
Strategies to Minimise CGT
Timing of Sale
If you're close to a tax year boundary, consider whether completing in the current or next tax year is more beneficial. Each tax year provides a fresh Annual Exempt Amount.
Spousal Transfer
Transfers between spouses/civil partners are CGT-free. If one partner is a basic rate taxpayer and the other is higher rate, transferring a share before sale can reduce the overall CGT bill.
Principal Residence Election
If you own multiple properties, you can elect which one is your "main residence" for PPR purposes. You have 2 years from acquiring a second property to make this election. Strategic elections can maximise relief.
Incorporation
For landlords with large portfolios, transferring properties to a limited company can defer CGT (through incorporation relief) and provide ongoing corporation tax benefits. However, this triggers SDLT on the transfer and has complex implications.
Use our UK Capital Gains Tax Calculator to compute your exact liability and model different scenarios.