Capital Gains Tax When Selling Property: A Simple Guide for 2026

Selling a property can bring a welcome financial boost. But if the property is not your main home, you may need to pay Capital Gains Tax on your profit.

This guide explains how CGT works for property sales in plain English. We cover when it applies, how much you might pay, and what you can do to reduce your bill legally.

Please note: This article is for general information only. It is not tax advice. For guidance specific to your situation, speak to a qualified tax adviser or accountant.

What is Capital Gains Tax?

Capital Gains Tax is a tax on the profit you make when you sell something that has increased in value. You pay tax on the gain, not the total sale price.

For example, if you bought a flat for £150,000 and sold it for £200,000, your gain is £50,000. CGT applies to that £50,000 profit.

CGT applies to various assets, including shares, antiques, and property. This guide focuses on property sales only.

When does CGT apply to property sales?

You usually do not pay CGT when you sell your main home. This is thanks to Principal Private Residence relief.

However, CGT may apply when you sell:

A second home or holiday home
A buy-to-let investment property
Inherited property
Property you bought as a development project
Part of your garden if it is over half a hectare

If you are selling inherited property, different rules apply. The gain is usually calculated from the property’s value at the date of death, not when the original owner bought it.

What is Principal Private Residence relief?

Principal Private Residence relief means most people pay no CGT on their main home. To qualify, the property must have been your only or main residence throughout your ownership.

You can still get partial relief if:

You lived in the property as your main home for part of the time
You were absent for certain reasons, such as working abroad
The property was your main home at some point

The final nine months of ownership always qualify for relief, even if you were not living there. This was reduced from 18 months in April 2020.

If you let out part of your home while living there, you may qualify for both Principal Private Residence relief and Lettings Relief. However, the rules changed significantly in April 2020 – more on this below.

What are the CGT rates for property in 2025/26 and 2026/27?

Property gains are taxed at the following rates. These apply for the 2025/26 tax year (ending 5 April 2026) and remain unchanged for 2026/27:

Basic rate taxpayers: 18% on residential property gains
Higher and additional rate taxpayers: 24% on residential property gains

The higher rate was reduced from 28% to 24% in April 2024, making it slightly cheaper to sell investment property than it was previously.

Your tax band depends on your total taxable income plus your property gain. If the gain pushes you into a higher tax band, you will pay 24% on the portion that falls in the higher rate band.

Example calculation

Imagine you earn £35,000 a year and make a £30,000 gain on a buy-to-let property. The basic rate tax band ends at £50,270 for 2025/26.

Your £35,000 income uses up most of your basic rate band. Only £15,270 of the gain falls within the basic rate. You pay 18% on that portion (£2,749).

The remaining £14,730 of the gain falls into the higher rate band. You pay 24% on that portion (£3,535).

Your total CGT bill in this example would be £6,284 (before deducting your annual exempt amount).

How much is the annual exempt amount?

Everyone has an annual tax-free allowance for capital gains. For both the 2025/26 and 2026/27 tax years, this allowance is £3,000.

This means you only pay CGT on gains above £3,000 in a tax year. If your total gains are below this amount, you pay no CGT at all.

The annual exempt amount has fallen significantly in recent years:

2022/23: £12,300
2023/24: £6,000
2024/25 onwards: £3,000

If you are married or in a civil partnership, you can transfer assets to your partner without triggering a gain. This means you can potentially use both annual allowances – up to £6,000 combined.

How do you calculate your gain?

Calculating your capital gain is straightforward. Follow these steps:

Start with your sale price
Subtract your purchase price
Subtract allowable costs
Apply any tax reliefs
Deduct your annual exempt amount

The result is your taxable gain.

Example

Sale price: £250,000
Purchase price: £180,000
Allowable costs: £10,000
Annual exempt amount: £3,000

Your gain before costs is £70,000. After deducting £10,000 in allowable costs, your gain is £60,000. After deducting your £3,000 annual exempt amount, your taxable gain is £57,000.

What costs can you deduct?

You can reduce your taxable gain by deducting certain costs. These include:

Estate agent fees when selling (typically 1% to 3% of the sale price plus VAT)
Solicitor or conveyancer fees for both buying and selling
Stamp Duty Land Tax paid when you bought the property
Costs of improvements that added value, such as extensions or loft conversions
Costs of proving or defending your title to the property

You cannot deduct costs of general maintenance or repairs. You also cannot deduct mortgage interest or council tax.

Keep all receipts and records. HMRC may ask to see evidence of your costs, and missing documentation could cost you thousands in unnecessary tax.

What are the reporting and payment deadlines?

You must report and pay CGT on UK residential property sales within 60 days of completion. This is a strict deadline, and HMRC has been actively enforcing it since 2025.

To report your gain:

Create a Capital Gains Tax on UK property account on the GOV.UK website
Calculate your gain and any tax due
Submit your report within 60 days of completion
Pay any tax due within the same 60-day period

You will need a Government Gateway user ID to access the service. If you do not have one, you can create one when you start.

Who needs to report: UK residents must file a 60-day return if there is a CGT liability (i.e. your gain exceeds the £3,000 annual exemption after reliefs). If the property was your main home throughout ownership, or your gain is fully covered by reliefs and allowances, you do not need to file. Non-UK residents must report all UK property disposals within 60 days, regardless of whether tax is due.

If you miss the deadline, HMRC charges a £100 late filing penalty plus interest at the Bank of England base rate plus 2.5%. The 60-day return is a payment on account – you must still include the disposal on your Self Assessment tax return for the year.

Has Lettings Relief changed?

Lettings Relief used to provide significant tax savings for people who let out their main home. However, the rules changed in April 2020 and the relief is now much more limited.

Lettings Relief only applies if:

You were in shared occupancy with your tenant, and
The letting occurred while you were living in the property as your main home

This means most landlords who let out their entire former home no longer qualify. The change has increased CGT bills for many property sellers.

How can you reduce your CGT bill legally?

There are legitimate ways to reduce your CGT bill. Here are some strategies to consider:

Use your annual exempt amount wisely

Time your sales to make the most of your £3,000 annual allowance. If you have multiple properties to sell, spreading sales across tax years can help.

Transfer assets to your spouse

Married couples and civil partners can transfer assets tax-free. This lets you use both annual exempt amounts and potentially benefit from lower tax rates.

Keep detailed records

Track all your allowable costs. Missing receipts could cost you thousands in extra tax. Keep records for at least five years after the tax year you sold.

Claim all available reliefs

Make sure you claim Principal Private Residence relief if you lived in the property. Even a short period of residence can reduce your tax bill.

Consider your timing

If you are close to the end of the tax year (5 April), consider whether delaying the sale could help. You might benefit from a fresh annual exempt amount or changes to your income tax band.

Offset losses

If you have made capital losses on other assets, you can carry these forward indefinitely. Use them to reduce your property gains.

Key points to remember

Your main home is usually exempt from CGT
Second homes and buy-to-let properties attract CGT at 18% or 24%
The annual exempt amount is £3,000 for 2025/26 and 2026/27
You must report and pay within 60 days of completion
Keep records of all deductible costs

This guide covers the basics, but every situation is different. Tax rules change regularly, and your personal circumstances affect what you owe. Always seek professional advice for complex situations.

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This article was published on 11 March 2026. Tax rates and allowances are correct for the 2025/26 and 2026/27 tax years. This content is for general information purposes only and does not constitute tax, legal, or financial advice. Always consult a qualified professional before making decisions about your tax affairs.