Capital Gains Tax on Property in the UK – A Guide for Property Owners

When Does Capital Gains Tax Apply on UK Property?

Capital Gains Tax applies when you sell or dispose of a property that has increased in value since you bought it. You are taxed on the profit (gain), not the total sale price.

CGT usually applies in the following situations:

• Selling a buy-to-let property
• Selling a second home or holiday home
• Selling an investment property
• Transferring ownership of a property (in some cases)
• Gifting a property (except to a spouse or civil partner)

If the property has increased in value, HMRC may expect you to report and pay CGT.

Buy-to-Let and Investment Properties

Buy-to-let landlords are one of the most common groups affected by Capital Gains Tax.

When you sell a rental property, any increase in value since purchase is potentially taxable. Even if you have never lived in the property, CGT will usually apply unless specific reliefs or exemptions reduce the gain.

Second Homes and Holiday Properties

Second homes and holiday properties are also subject to CGT when sold. These properties do not qualify for full Private Residence Relief, so most of the gain is taxable.

If the property was sometimes rented out, you may also need to consider additional reliefs or apportionment of the gain.

Main Residence and Private Residence Relief

If the property you are selling has been your only or main home, you may qualify for Private Residence Relief (PRR). This relief can significantly reduce or even eliminate your CGT bill.

However, you may still pay CGT if:

• The property was partly rented out
• Part of the home was used exclusively for business
• You moved out before selling

If you have owned or occupied more than one residence, the availability and amount of Private Residence Relief will depend on your individual circumstances, including how and when each property was occupied.

How Is Property Capital Gains Tax Calculated?

Capital Gains Tax is calculated using a simple formula:

Sale price – Purchase price – Allowable costs = Taxable gain

From this gain, you can deduct certain costs, including:

• Estate agent fees
• Solicitor and legal fees
• Stamp Duty Land Tax (SDLT) paid when purchasing (or the equivalent land transaction tax if the property is in Scotland or Wales)
• Qualifying capital improvement costs (see below)

HMRC then applies your annual exemption and tax rate to the remaining gain.

Allowable Costs vs Repairs and Maintenance

It is important to understand the difference between capital improvements and repairs.

Certain capital improvement costs may be deductible when calculating the gain, provided they meet the relevant conditions and are still reflected in the property at the time of disposal. Routine repairs and maintenance are generally not deductible for CGT purposes, and expenditure already claimed against rental income cannot normally be deducted again.

Examples of the type of costs typically considered:

• Extensions and loft conversions may qualify as capital improvements
• Painting, decorating, and fixing leaks or broken items are generally treated as repairs, not improvements

Annual CGT Exemption and Tax Rates

Each individual has an annual CGT allowance, which is £3,000 for the 2025/26 tax year. Gains above this allowance are taxable.

For the 2025/26 tax year, UK residential property CGT rates are:

• 18% for basic rate taxpayers
• 24% for higher and additional rate taxpayers

These figures should be checked against HMRC's published rates and allowances for the specific tax year in which the property is sold, as both are reviewed and can change from year to year.

60-Day CGT Reporting and Payment Deadline

One of the most important rules for UK property owners is the 60-day CGT reporting requirement.

If you sell a UK residential property and owe Capital Gains Tax, you must report the sale to HMRC, calculate your gain, and pay any tax due — all within 60 days of completion.

This is separate from your Self Assessment Tax Return. Missing this deadline can result in penalties and interest.

Non-UK Resident Property Owners

If you are a non-UK resident and sell UK property, you are still required to report the sale to HMRC within 60 days, even if no tax is due. This is one of the most commonly overlooked HMRC obligations, and penalties can apply even where the disposal results in no tax owed.

This rule applies to:

• Overseas landlords
• Expats
• Foreign investors owning UK property

Selling Inherited Property

If you inherit a property and later sell it, CGT may apply based on the increase in value from the date of inheritance to the date of sale.

You do not pay CGT when you inherit the property, but you may pay it when you sell it if the value has increased.

Gifting a Property

Gifting a property can also trigger Capital Gains Tax.

HMRC treats most gifts as if they were sold at market value, meaning CGT may still apply even if no money changes hands. Exceptions may apply when transferring property to a spouse or civil partner.

Simple CGT Calculation Example

Let's say:

• Purchase price: £200,000
• Sale price: £300,000
• Legal and selling costs: £10,000
• Capital improvements: £20,000

Gain = £300,000 – £200,000 – £30,000 = £70,000

If your annual exemption is £3,000, taxable gain becomes £67,000. This amount is then taxed at your applicable CGT rate.

Preparing Before Completion

If you are planning to sell a property, it is advisable to gather your original purchase documents, completion statements, evidence of qualifying improvements and anticipated selling costs before completion. Preparing early can make it easier to calculate and report any CGT due within the 60-day deadline.

Records and Documents to Keep

To calculate CGT accurately, you should keep:

• Purchase and sale completion statements
• Legal and estate agent invoices
• SDLT records
• Invoices and evidence for qualifying capital improvements

Good record-keeping makes your CGT reporting much easier.

Penalties for Late Reporting or Payment

Failing to report or pay Capital Gains Tax on time can result in:

• Late filing penalties
• Interest charges
• Additional HMRC investigations

The 60-day deadline is strictly enforced, so early preparation is essential.

How Taxeezy Can Help

Capital Gains Tax on property can be complex, especially when dealing with multiple properties, inheritance, or partial exemptions.

Our team can help you meet your reporting obligations and ensure relevant allowable costs and reliefs are considered when calculating your property Capital Gains Tax position.

Whether you are a landlord, investor, or selling a second home, our team ensures you stay compliant while avoiding unnecessary tax.