Real Estate · UK

Capital Gains Tax When You Sell a UK Property

Selling your own home is almost always tax-free. Selling anything else — a second home, a buy-to-let, an inherited property — usually is not, and the deadline for telling HMRC is far shorter than most people expect.

The rates for 2026/27

Where the gain falls	Rate
Within your remaining basic-rate band	18%
Above the higher-rate threshold	24%
Annual exempt amount	£3,000 per person

Since the Budget of 30 October 2024, residential property is taxed at the same two rates as everything else — the old, higher property-only rate is gone.

The important mechanic is that your income fills the basic-rate band first. Salary, pension and rental income are counted, and only the gap that remains up to the higher-rate threshold is available to absorb the gain at 18%. Everything beyond it is taxed at 24%. A higher-rate taxpayer therefore pays 24% on essentially the whole gain, while someone with modest income may get a meaningful slice at 18%.

Working out the gain

The gain is not the difference between what you paid and what you sold for. You can deduct:

• Buying and selling costs — stamp duty paid on purchase, legal fees at both ends, survey, and estate agent commission.
• Capital improvements — an extension, a new kitchen where none existed, a loft conversion. Anything that improved the property rather than maintained it.

You cannot deduct repairs, redecoration, or mortgage interest — those are revenue costs, and on a let property they belong in the rental accounts instead. The distinction between an improvement and a repair is where most disputes arise, so keep invoices for anything structural.

For an inherited property the acquisition cost is the probate value, not what the deceased paid. That often means a far smaller gain than owners assume, and it is worth establishing before assuming a large bill.

Private Residence Relief

Relief covers the period a property was your only or main home, plus the final nine months of ownership whether or not you lived there — which exists precisely so that a slow sale after moving out does not create a charge.

It is restricted where:

• You let the property out for part of the time you owned it.
• Part of it was used exclusively for business. Working from home in a room that is also used domestically does not restrict relief; a dedicated, exclusively-commercial space can.
• The grounds exceed half a hectare.
• You owned more than one residence and this was not the nominated main one.

If you have two homes, you can nominate which counts as the main residence, but only within a limited window after the second becomes available. It is a genuine planning choice and easy to miss.

What a couple can do

Transfers between spouses and civil partners are made on a no gain, no loss basis — no tax on the transfer itself. Moving a share of a property to a spouse before selling therefore does two useful things: it gives the couple two £3,000 allowances instead of one, and it can move part of the gain into a lower-rate band if their incomes differ.

The transfer has to be real and completed before the sale is agreed. Done after, or done as a paper exercise, it will not work.

Losses are worth recording

Capital losses can be set against gains in the same year, and carried forward indefinitely — but only if you report them, generally within four years of the end of the tax year in which they arose. A loss on shares in one year can shelter a property gain years later, which is a good reason to declare losses even in a year when they save nothing.

Scotland and Wales

Capital gains tax is a UK-wide tax, so the rates and the 60-day deadline are the same wherever the property is. What differs is the purchase tax — LBTT in Scotland and LTT in Wales — and, for Scottish taxpayers, the income tax bands, which affect how much of a gain falls at 18%.

Before you sell

1. Assemble the cost base first — purchase price, the stamp duty you paid, legal fees, and every improvement invoice. Reconstructing this after completion, against a 60-day clock, is the usual scramble.
2. Check whether a spouse transfer is worth doing, and do it before agreeing a sale.
3. Consider which tax year to complete in if you are near a band edge or have already used the allowance.
4. Diarise the 60 days from completion, not from exchange.
5. Take advice if Private Residence Relief is partial — apportionment is where the real money is, and it is the part most often got wrong.

Related

• The cost of selling a house in the UK — agent fees, conveyancing and the early repayment charge.
• UK stamp duty surcharges — what an additional property costs to buy.
• Stamp duty rates by year — for establishing the duty you paid, which is deductible from the gain.

Sources

• GOV.UK — Capital Gains Tax: rates, the annual exempt amount and reporting property disposals
• GOV.UK — Private Residence Relief (HS283), including the final period exemption
• HMRC — UK property reporting service and the 60-day deadline

Rates and allowances for the 2026/27 tax year. Compiled from public sources and not individually verified by a regulated adviser. General information, not tax advice — take professional advice before a disposal of this size.

Frequently asked questions

What is the capital gains tax rate on UK property?
18% on the part of the gain that falls inside your remaining basic-rate band, and 24% above it. Since the October 2024 Budget residential property uses the same two rates as other assets, so there is no longer a separate higher property rate.

Do I pay capital gains tax when I sell my home?
Usually not. Private Residence Relief covers a sale of your only or main home in full. It can be restricted if you let the property out, used part of it exclusively for business, the grounds exceed half a hectare, or it was not your main home for the whole period you owned it.

How long do I have to report and pay?
60 days from completion, through HMRC’s UK property reporting service, with the tax payable in the same window. This is separate from Self Assessment, it applies even if you file a return anyway, and penalties start at £100 for missing it.

What is the capital gains allowance for 2026/27?
£3,000 per person. It has been cut sharply from £12,300 in 2022/23, so gains that produced no tax a few years ago now do. It cannot be carried forward — unused allowance is lost at the end of the tax year.

How can a couple reduce capital gains tax on a property?
Transfers between spouses and civil partners are made on a no gain, no loss basis, so moving a share before sale gives the couple two £3,000 allowances and can move part of the gain into a lower-rate band. The transfer must be genuine and completed before the sale is agreed.