Capital Gains Tax on UK Property: Essential Facts

Selling a property can generate a substantial profit, but it may also create a Capital Gains Tax (CGT) liability. Understanding the rules before completing a sale can help property owners calculate their potential tax bill, identify available reliefs and avoid missing important HMRC deadlines.

Whether you own a buy-to-let property, a second home or an investment property, the tax treatment depends on your circumstances and the type of property you sell.

In this guide, Felix & Co Accountants explains seven essential facts about Capital Gains Tax on UK property in 2026, including current residential property rates, allowable costs, tax-free allowances and reporting requirements.

What Is Capital Gains Tax on UK Property?

Capital Gains Tax is a tax on the profit you make when you dispose of an asset that has increased in value. For property owners, it commonly applies to the sale of rental properties, second homes, investment properties and certain land.

You do not usually pay CGT on the sale of your main home if you qualify for full Private Residence Relief.

For example, suppose you bought a buy-to-let property for £200,000 and later sold it for £300,000. The initial difference is £100,000, but your taxable gain may be lower after deducting eligible buying, selling and improvement costs and applying any available reliefs.

The tax is generally calculated on the chargeable gain rather than the entire sale proceeds.

Understanding how the gain is calculated is important because the final tax liability depends on more than the difference between the purchase price and the selling price.

Who Needs to Pay Capital Gains Tax When Selling Property?

You may need to pay Capital Gains Tax if you sell or otherwise dispose of a property that is not fully covered by an applicable exemption or relief.

This commonly affects:

• Landlords: Individuals selling buy-to-let properties may owe CGT on their chargeable gains.
• Second-home owners: A holiday home or another residential property may be subject to CGT.
• Property investors: Gains from investment properties and certain land disposals may be taxable.
• People selling inherited property: CGT may arise if the property increases in value after inheritance and is subsequently sold.
• Non-UK residents: Special reporting and tax rules apply to UK property and land disposals.

The tax treatment depends on the ownership structure, the property’s use and the owner’s circumstances.

What about selling your main residence?

Private Residence Relief can eliminate CGT on a qualifying main home. Full relief is generally available where the relevant conditions are met, including occupying the property as your only or main residence throughout ownership and meeting the applicable requirements concerning use and grounds.

If you have rented out part of your home, used part of it exclusively for business or spent periods living elsewhere, the position may be more complicated.

Read the official HMRC Private Residence Relief guidance to understand the conditions that apply.

What Are the Capital Gains Tax Rates on UK Property in 2026?

For individuals disposing of residential property that does not qualify for full Private Residence Relief, the applicable CGT rates depend on the tax year, taxable income and available basic-rate Income Tax band.

For the 2026/27 tax year, the main residential property CGT rates for individuals are:

• 18% on the portion of the taxable gain falling within the available basic-rate band.
• 24% on the portion falling above the available basic-rate band.

Your taxable gain is added to your taxable income when determining how much of the gain falls within each band. Consequently, a person may pay both rates on different portions of the same gain.

The annual exempt amount for individuals is £3,000 for the 2026/27 tax year. This allowance reduces the amount of chargeable gains subject to tax; it is not a tax credit worth £3,000.

Different rules apply to companies, trusts and certain other ownership arrangements.

For current rates and official examples, consult HMRC’s Capital Gains Tax rates and allowances guidance.

Which Capital Gains Tax Reliefs and Allowances Can You Claim?

Appropriate reliefs and allowable costs can reduce the chargeable gain on a property disposal. However, eligibility depends on the circumstances.

Private Residence Relief

Private Residence Relief can reduce or eliminate CGT when you sell a property that qualifies as your main home.

The amount of relief depends on factors such as how long you occupied the property as your main residence and whether any periods or parts of the property fall outside the qualifying conditions.

Annual exempt amount

Individuals generally have a £3,000 annual exempt amount for 2026/27. If your total relevant gains fall within the available allowance, you may not have CGT to pay, although reporting obligations can still apply in particular circumstances.

The allowance applies to qualifying gains across relevant assets, not separately to every property sold.

Allowable buying and selling costs

Eligible costs may include estate agent fees, solicitors’ fees and certain expenses incurred when acquiring or disposing of the property.

These costs must meet the relevant tax rules and be supported by appropriate records.

Capital improvement costs

Qualifying expenditure on improvements that enhance the property may be deductible when calculating the gain, provided the expenditure meets HMRC’s requirements.

For example, the cost of constructing an extension may qualify, whereas ordinary maintenance and decorating costs generally do not count as deductible capital improvement expenditure for CGT purposes.

Other reliefs

Depending on the circumstances, additional reliefs may be relevant to particular disposals. Do not assume that a relief applies simply because a property was rented out or owned for a long period.

Check the specific eligibility conditions before including any relief in your calculation.

How Do You Calculate Capital Gains Tax on a Property Sale?

The calculation generally starts with the sale proceeds and deducts the property’s acquisition cost and eligible expenditure. Applicable reliefs and the annual exempt amount are then considered when determining the taxable gain.

A simplified illustration is shown below.

This example assumes that the £10,000 of costs is fully allowable, that no other reliefs or losses apply and that the full £3,000 annual exempt amount is available.

The resulting £87,000 is the illustrative taxable gain, not the amount of tax payable.

The actual CGT liability depends on the applicable rates, the seller’s taxable income, any available basic-rate band and other relevant tax circumstances.

For a detailed calculation, use the official HMRC property gain calculator and guidance.

What Is the 60-Day Capital Gains Tax Reporting Deadline?

One of the most important rules for UK residential property sellers is the requirement to report and pay CGT within 60 days of completion where tax is due under the applicable rules.

This means you should not automatically wait until the next Self Assessment filing deadline to deal with a taxable residential property disposal.

Missing the deadline can result in interest and penalties.

Before selling, gather the following information:

• Property purchase and sale prices.
• Acquisition and completion dates.
• Eligible buying, selling and improvement costs.
• Details of any applicable reliefs or exemptions.
• Ownership percentages where the property is jointly owned.

UK residents generally do not need to report gains through the property reporting service if their total gains are below the tax-free allowance, subject to the applicable rules. Non-UK residents have separate reporting obligations and generally must report UK property and land disposals even when no tax is due.

If you are already required to submit a Self Assessment return, you may also need to include the disposal in that return.

For the precise requirements, see HMRC’s guidance on reporting and paying CGT on UK property.

How Can Property Owners Reduce Capital Gains Tax Errors?

Careful preparation before a sale can help you calculate the correct gain and avoid preventable reporting problems.

Consider the following steps:

1. Review the property’s acquisition cost. Keep the original purchase documents and any relevant valuation records.
2. Collect supporting invoices. Identify eligible buying, selling and capital improvement costs.
3. Check available reliefs. Determine whether Private Residence Relief or another applicable relief may reduce the gain.
4. Calculate the taxable gain. Account for allowable costs, losses, the annual exempt amount and the relevant tax rates.
5. Confirm reporting deadlines. Establish whether a UK property CGT return and payment are required within 60 days of completion.
6. Check ownership arrangements. Each joint owner generally calculates and reports their own share of the gain.
7. Seek professional advice where necessary. Complicated ownership structures, periods of letting, inherited properties and non-resident disposals can require more detailed calculations.

Good record keeping and early planning can make the sale process easier and help you avoid unexpected tax liabilities.

Frequently Asked Questions About Capital Gains Tax on UK Property

Do I pay Capital Gains Tax when selling my main home?

Not usually if you qualify for full Private Residence Relief. If the property was rented out, used exclusively for business or not occupied as your main residence throughout the relevant period, some of the gain may be taxable.

What is the Capital Gains Tax allowance for 2026/27?

The annual exempt amount for individuals is £3,000 for the 2026/27 tax year. It applies to relevant gains collectively rather than providing a separate allowance for each property.

What are the residential property CGT rates in 2026?

For individuals, the main rates are 18% and 24%, depending on how the taxable gain falls within the available basic-rate Income Tax band. The calculation depends on taxable income and the circumstances of the disposal.

Can I deduct renovation costs from my property gain?

Some capital improvement costs may be deductible, provided they meet the relevant rules. Ordinary repairs and maintenance generally do not qualify as capital improvement expenditure for CGT purposes.

When must I report Capital Gains Tax on a UK property sale?

Where CGT is due on a qualifying UK residential property disposal, the deadline is generally 60 days after completion. Specific reporting rules apply to non-residents and other circumstances.

Can an accountant help reduce my Capital Gains Tax bill?

An accountant can help calculate the gain correctly, identify eligible costs and reliefs, check reporting obligations and explain the tax implications of a proposed sale. Any reduction must be based on legitimate reliefs and the applicable tax rules.

Need Help With Capital Gains Tax on UK Property?

Selling a property can involve complex calculations, especially where the property has been rented out, inherited, jointly owned or used as a main residence at different times.

Felix & Co Accountants can help you review your property sale, identify relevant reliefs, calculate your potential CGT liability and understand the reporting deadlines that apply.

Contact Felix & Co Accountants before completing your property sale to discuss your circumstances and plan for the relevant tax obligations.

Capital Gains Tax can significantly affect the proceeds you retain when selling a UK property. Understanding the current rates, the annual exempt amount, allowable costs and available reliefs can help you make informed decisions.

The most effective approach is to calculate the potential gain before selling, maintain accurate records and confirm your reporting obligations early.

Because tax rules and individual circumstances vary, check current HMRC guidance or obtain professional advice before relying on a particular calculation.