Capital Gains Tax on Property: UK Rules and Rates (2026/27)
Direct Answer: Capital Gains Tax (CGT) on UK property applies when you sell a second home, buy-to-let or inherited property for more than you paid for it. For 2026/27 the first £3,000 of gains is tax-free, and everything above that is taxed at 18% within your basic rate band or 24% above it, reported to HMRC within 60 days of completion.
As of 2026, high property values combined with a shrinking annual exempt amount mean far more landlords, second-home owners and people selling an inherited house are finding themselves with a genuine CGT bill - and a strict 60-day clock to report and pay it.
This guide explains exactly how the tax is calculated on a property sale, which properties are exempt, what you can legally deduct from your gain, and the deadlines HMRC enforces in 2026/27.
What Is Capital Gains Tax on Property?
Capital Gains Tax is a tax on the profit you make when you sell (or "dispose of") an asset that has increased in value - it's charged on the gain itself, not on the total sale price. For property, this typically applies to second homes, buy-to-let investments, inherited houses, and land, rather than the home you actually live in.
HM Revenue and Customs (HMRC) administers CGT and expects it to be reported and paid separately from your normal Self Assessment tax return when the asset is UK residential property, via a dedicated fast-track system introduced specifically for property disposals.
The £3,000 CGT Allowance for 2026/27
Every individual has an annual exempt amount - the amount of gains you can make each tax year before any CGT is due. For the 2026/27 tax year, that allowance is £3,000, a sharp reduction from £12,300 in 2022/23 and £6,000 in 2023/24, as the government has progressively cut the exemption in successive Budgets.
The allowance cannot be carried forward - if you don't use it in a given tax year, it's lost. Married couples and civil partners each have their own £3,000 allowance, so jointly-owned property can effectively shelter £6,000 of combined gain before any tax is due.
Capital Gains Tax Rates on Property in 2026/27
For property disposals completed from 30 October 2024 onwards, residential property gains are taxed as follows:
| Income Tax Position | CGT Rate on Property Gains |
|---|---|
| Gain falls within your remaining basic rate band (total taxable income + gain up to £50,270) | 18% |
| Gain falls above the basic rate band (higher and additional rate taxpayers, or the portion of a gain pushing you over £50,270) | 24% |
Because the rate depends on your total taxable income for the year plus the gain, a modest earner can pay 18% on the whole gain, while a higher earner - or someone whose gain alone pushes them over the £50,270 threshold - pays 24% on the portion above it. Property gains are always added on top of your other income when working out which band applies, so gains are effectively taxed last.
When You Don't Pay CGT: Your Main Home
Private Residence Relief (PRR) exempts most people from CGT entirely when they sell their own home. You qualify for full relief if, throughout your ownership, the property has been your only or main residence, you haven't let out any part of it (a lodger sharing your home is usually fine), and the garden or grounds don't exceed roughly half a hectare.
If you've lived in the property for only part of the time you owned it - for example, you moved out and let it before selling - relief is apportioned, and the letting period outside a small final-period exemption becomes chargeable.
CGT on Second Homes, Buy-to-Lets and Inherited Property
Any property that isn't your main residence loses the protection of Private Residence Relief and is fully exposed to CGT on the whole gain above your allowance:
- Second homes and holiday homes - taxed on the gain between purchase and sale price, even if you never let them out.
- Buy-to-let investment property - taxed the same way; mortgage interest relief changes since 2020 relate to Income Tax on rent, not CGT on sale, so the two are separate calculations.
- Inherited property that isn't your main home - your cost basis is the property's probate value (its market value at the date of death), not what the deceased originally paid, so CGT is only due on growth after that point.
How to Calculate Your Capital Gain
The calculation follows a fixed order: start from your sale price and work down to a taxable figure.
- Sale price minus purchase price = your raw gain.
- Deduct buying costs - Stamp Duty Land Tax and legal fees paid on purchase.
- Deduct selling costs - estate agent fees and legal fees paid on sale.
- Deduct the cost of capital improvements - a loft conversion, extension or new kitchen installed as a genuine improvement (not routine repairs, redecoration or maintenance).
- Deduct your £3,000 annual exempt amount.
- The result is your taxable gain, charged at 18% and/or 24% depending on your income.
| Item | Example (Buy-to-Let Sale) |
|---|---|
| Sale price | £310,000 |
| Purchase price | £220,000 |
| Buying costs (SDLT + legal) | £8,500 |
| Selling costs (agent + legal) | £4,200 |
| Capital improvements (extension) | £15,000 |
| Gain before allowance | £62,300 |
| Annual exempt amount | -£3,000 |
| Taxable gain | £59,300 |
| CGT at 24% (higher rate taxpayer) | £14,232 |
The 60-Day Reporting and Payment Deadline
Since 27 October 2021, anyone selling UK residential property with CGT to pay must report the disposal and pay the tax within 60 days of completion - not by the following January's Self Assessment deadline. This applies whether you're a UK resident or a non-UK resident, and to individuals, trustees and personal representatives of an estate.
Reporting is done through HMRC's CGT on UK Property Account, set up via Government Gateway, separately from your annual tax return (though the gain must still be included on your Self Assessment return if you complete one, referencing what you've already reported). Missing the 60-day window triggers automatic late-filing penalties and interest on any tax paid late.
Reducing Your Capital Gains Tax Bill Legally
- Use both spouses' allowances. Transfers between spouses or civil partners living together happen at no gain, no loss for CGT, so jointly owning a property before sale can use two £3,000 allowances and potentially two basic-rate bands.
- Offset capital losses. Losses from other asset sales in the same tax year, or brought forward from previous years, can be deducted from your gain before tax is calculated.
- Time the sale around your income. Selling in a tax year where your other income is lower can keep more of the gain in the 18% band rather than the 24% band.
- Keep every receipt. SDLT statements, legal invoices and building invoices for genuine improvements are all needed to substantiate deductions if HMRC queries the calculation.
Frequently Asked Questions
What is the Capital Gains Tax allowance for 2026/27?
The Capital Gains Tax annual exempt amount for the 2026/27 tax year is £3,000 per person. Gains above this amount are taxable; gains below it are entirely tax-free, and the allowance cannot be carried forward if unused.
What are the Capital Gains Tax rates on property in 2026/27?
For disposals from 30 October 2024 onwards, residential property gains are taxed at 18% within your basic rate Income Tax band and 24% on any amount above it, for both basic and higher/additional rate taxpayers on the excess.
Do I pay Capital Gains Tax when I sell my main home?
Usually not. Private Residence Relief exempts the sale of your only or main home from CGT, provided you've lived in it as your main residence for the whole time you've owned it and haven't let it out or used part of it exclusively for business.
Do I pay CGT on a second home or buy-to-let property?
Yes. Second homes, buy-to-let properties and inherited properties that aren't your main residence are all subject to CGT at 18%/24% on any gain above your £3,000 annual exempt amount, because Private Residence Relief doesn't apply to them.
How many days do I have to report and pay CGT after selling UK residential property?
You must report the sale and pay any Capital Gains Tax owed within 60 days of the completion date, using HMRC's CGT on UK Property Account accessed via Government Gateway. This applies to UK residents and non-residents alike.
How do I calculate my capital gain on a property sale?
Subtract your original purchase price, buying and selling costs (such as solicitor fees, estate agent fees and Stamp Duty Land Tax paid on purchase), and the cost of any capital improvements from your sale price, then deduct your £3,000 annual exempt amount to reach the taxable gain.
Can I transfer property to my spouse to reduce Capital Gains Tax?
Yes. Transfers of assets between spouses or civil partners who live together are treated as taking place at no gain and no loss for CGT purposes, which can let couples use both partners' £3,000 allowances and lower tax bands when the property is eventually sold.
What costs can I deduct before calculating Capital Gains Tax on a property?
You can deduct the original purchase price, Stamp Duty Land Tax and legal fees paid when buying, estate agent and legal fees paid when selling, and the cost of capital improvements such as an extension or loft conversion. Routine maintenance and decorating costs do not qualify.
How is Capital Gains Tax worked out on an inherited property?
Your cost basis is the property's market value at the date of death, as used for probate, not what the original owner paid for it. CGT is then only due on any further gain between that probate value and the eventual sale price, minus allowable costs and your annual exempt amount.
Does Capital Gains Tax apply if I'm a non-UK resident selling UK property?
Yes. Non-UK residents have been liable for CGT on UK residential property since April 2015 and on UK commercial property and land since April 2019, and must also report and pay within 60 days of completion via the same CGT on UK Property Account.
Is Capital Gains Tax the same as Stamp Duty Land Tax?
No. Stamp Duty Land Tax (SDLT) is paid by the buyer when a property is purchased, based on the purchase price. Capital Gains Tax is paid by the seller when a property is later sold at a profit, based on the increase in value. They are separate taxes on opposite ends of the same transaction.
A Quick Note on UK Tax Planning
Capital Gains Tax allowances and rates change frequently in UK Budgets - the figures in this guide reflect confirmed 2026/27 rules as published on GOV.UK at the time of writing. Always check the current annual exempt amount and rates on GOV.UK before relying on any calculation, and consider speaking to an accountant or tax adviser for a property sale with a significant gain. See our full disclaimer.