Capital Gains Tax on UK Property Sales: What You Owe and When to Report

When does selling a property trigger Capital Gains Tax?

If you sell — or give away — a residential property in the UK that is not your only or main residence, you will almost certainly owe Capital Gains Tax (CGT) on the profit. That covers buy-to-let investments, second homes, inherited properties you never lived in, and land with planning permission. Your main home is usually exempt under Private Residence Relief, but the moment a property falls outside that shelter, CGT applies from the date of completion.

The rules changed significantly in October 2024 when the Chancellor adjusted CGT rates for residential property. Those rates now sit at 18 per cent for basic-rate taxpayers and 24 per cent for higher and additional-rate taxpayers — down from the previous 28 per cent top rate but still well above the standard CGT rates of 10 and 20 per cent that apply to other assets like shares.

How to calculate the gain

The calculation itself is straightforward, but getting each number right matters:

1. Start with the sale price — the amount stated on the completion statement, not the asking price or any figure agreed verbally.
2. Subtract the original purchase price — or, if you inherited the property, its probate value at the date of death.
3. Subtract allowable costs: stamp duty paid on purchase, solicitor and estate agent fees on both purchase and sale, and the cost of improvements that added value (a new kitchen, an extension, rewiring). Routine maintenance and decoration do not count.
4. Apply your annual exempt amount: For the 2026/27 tax year, the CGT annual exempt amount is 3,000 pounds. If you own the property jointly with a spouse or civil partner, each person gets their own 3,000-pound allowance.
5. Apply the correct rate: Add the taxable gain to your other income for the year. The portion falling within the basic-rate band (up to 37,700 pounds above the personal allowance of 12,570 pounds) is taxed at 18 per cent. Anything above that is taxed at 24 per cent.

Worked example

You bought a buy-to-let flat in 2019 for 200,000 pounds. You spent 8,000 pounds on stamp duty, 2,500 pounds on legal fees, and 15,000 pounds on a new bathroom and boiler. You sell in April 2026 for 280,000 pounds, paying 4,000 pounds in estate agent and solicitor fees.

• Gain: 280,000 minus 200,000 minus 8,000 minus 2,500 minus 15,000 minus 4,000 = 50,500 pounds
• After annual exempt amount: 50,500 minus 3,000 = 47,500 pounds taxable
• If your salary is 45,000 pounds, your remaining basic-rate band is 37,700 minus (45,000 minus 12,570) = 5,270 pounds
• Tax: 5,270 at 18 per cent (948.60) plus 42,230 at 24 per cent (10,135.20) = 11,083.80 pounds total CGT

The 60-day reporting rule

Since April 2020, HMRC requires you to report and pay CGT on UK residential property disposals within 60 days of completion. This applies even if you normally file a Self Assessment tax return — you cannot wait until the following January to declare it.

The report is filed through HMRC's "Report and pay Capital Gains Tax on UK property" service, which is separate from your Self Assessment account. You will need a Government Gateway ID to log in. If you already file Self Assessment, you must also include the disposal on your tax return for the year, but you can credit the amount already paid through the 60-day report.

What happens if you miss the deadline?

HMRC issues an automatic late-filing penalty of 100 pounds if the report is up to six months late. If you are more than six months late, a further penalty of up to 300 pounds or five per cent of the tax due (whichever is greater) can apply. Interest accrues on late payment from the 60-day deadline, not from the date the penalty notice is issued. The current late-payment interest rate is 7.5 per cent — punishing enough to make timely reporting worthwhile.

Reliefs that reduce or eliminate your bill

Private Residence Relief

If the property was your main home for part of the ownership period, you get Private Residence Relief (PRR) for those years plus the final nine months of ownership regardless of whether you lived there. The relief is proportional: if you owned a property for ten years and lived in it as your main home for six of those years, PRR covers 6.75 out of 10 years (six years of occupation plus nine months), sheltering 67.5 per cent of the gain from tax.

Letting Relief

If you lived in the property at some point and then let it out, Letting Relief can shelter up to 40,000 pounds of gain attributable to the letting period. But it only applies where the property was also your residence at some point during ownership — a pure buy-to-let that you never lived in does not qualify.

Transfer between spouses

Transfers between spouses and civil partners are treated as "no gain, no loss" disposals — no CGT at the point of transfer. This can be useful for tax planning: transferring a share of the property to a spouse who pays a lower rate of income tax before selling can reduce the overall CGT bill. Since April 2023, separated couples have up to three years from the date of separation (rather than the end of the tax year of separation) to make no-gain-no-loss transfers.

Losses

If you sold another asset at a loss in the same tax year, or have unused capital losses carried forward from previous years, those losses reduce your taxable gain before the annual exempt amount is applied. Losses must be reported to HMRC within four years of the end of the tax year in which they arose.

Common mistakes and how to avoid them

• Forgetting improvement costs: Keep every receipt for work that added value — kitchens, extensions, central heating upgrades. These reduce your gain pound for pound.
• Confusing exchange and completion dates: The 60-day clock starts from completion, not exchange. If exchange and completion are months apart, plan your cash flow accordingly.
• Ignoring the annual exempt amount: At 3,000 pounds it is small, but if you and a spouse each own half the property, that is 6,000 pounds of gain sheltered — saving up to 1,440 pounds in tax at the higher rate.
• Not reporting a main-home sale with periods of absence: If you let your main home for a period, PRR does not cover the entire ownership automatically. You still need to calculate the taxable portion and may need to file.
• Using estimated figures: HMRC can open an enquiry within 12 months of filing. Using round numbers or guesses for purchase costs invites scrutiny. Gather actual transaction records from your solicitor or Land Registry.

Non-residents and UK property

If you are not UK-resident, you still owe CGT on UK residential property disposals. Non-Resident Capital Gains Tax (NRCGT) has applied since April 2015 for residential property and since April 2019 for all UK land and property. The same 60-day reporting requirement applies, and non-residents file through the same HMRC digital service.

Non-residents can elect to rebase the property value to April 2015 (or April 2019 for commercial property), meaning only the gain since that date is taxable. This is often beneficial for long-held assets that appreciated significantly before the NRCGT rules took effect.

Record-keeping checklist

HMRC expects you to keep records for at least five years after the 31 January filing deadline for the relevant tax year. For property disposals, that means holding onto:

• Completion statements for purchase and sale
• Mortgage redemption figures (to verify costs, not taxable themselves)
• Invoices and receipts for improvements
• Letting agent statements if claiming Letting Relief
• Probate valuation if the property was inherited
• Evidence of occupation dates if claiming PRR for part of the ownership period

Filing accurately, keeping records, and using available reliefs can make a substantial difference. A 50,000-pound gain taxed at 24 per cent costs 12,000 pounds. The same gain with proper use of PRR, Letting Relief, spousal transfers, and carried-forward losses could owe nothing at all. The maths is worth doing before the 60-day clock runs out.