Capital Gains Tax on Property: Complete Guide 2025/26

Selling a property that is not your main home can trigger a Capital Gains Tax (CGT) liability. With CGT rates on residential property higher than on other assets, and a much-reduced annual exempt amount, understanding the rules is more important than ever. This guide covers everything you need to know about CGT on property for the 2025/26 tax year — rates, reliefs, reporting deadlines, and worked examples to help you calculate exactly what you owe.

CGT Rates on Residential Property 2025/26

Capital Gains Tax on residential property is charged at higher rates than gains on other assets such as shares or business assets. For 2025/26, the rates are:

Which rate applies depends on your total taxable income plus the gain. If adding the gain to your taxable income keeps you within the basic rate band (up to £50,270), you pay 18%. If it pushes you into the higher rate band, the portion above the basic rate threshold is taxed at 24%. Many property sellers find that even relatively modest gains push them into the higher rate.

These rates apply specifically to residential property. Gains on other assets are taxed at 10% (basic rate) and 20% (higher rate) — a significant difference that makes property CGT planning particularly important.

Annual Exempt Amount

Every individual has a Capital Gains Tax annual exempt amount (AEA) — the amount of gains you can make each tax year before any CGT is due. For 2025/26, the AEA is just £3,000. This is a dramatic reduction from the £12,300 that applied as recently as 2022/23, and represents one of the most significant tax increases in recent years.

The AEA cannot be carried forward — if you do not use it in a tax year, it is lost. However, married couples and civil partners each have their own AEA, so joint ownership of a property can provide a combined exemption of £6,000.

Calculating Your Capital Gain

The basic calculation for a property capital gain is:

Capital Gain = Sale Price
             - Purchase Price
             - Allowable Costs
             - Annual Exempt Amount (£3,000)

Allowable Costs include:
  • Stamp Duty Land Tax paid on purchase
  • Legal fees (buying and selling)
  • Estate agent fees on sale
  • Costs of improvements (not repairs or maintenance)
  • Survey and valuation fees

It is crucial to understand the distinction between improvements and repairs. An extension, loft conversion, or new bathroom where none existed before is an improvement and is allowable. Repainting, fixing a leaking roof, or replacing a like-for-like boiler is maintenance and is not allowable. The distinction can make a significant difference to your tax bill.

Worked Example

Sarah is a higher rate taxpayer. She bought a buy-to-let flat in 2015 for £200,000 and sells it in 2025 for £320,000. Her costs are:

Sale price:                    £320,000
Less: Purchase price:         -£200,000
Less: SDLT on purchase:         -£1,500
Less: Legal fees (buy + sell):  -£3,200
Less: Estate agent fees:        -£4,800
Less: Kitchen extension (2019): -£15,000
                               ─────────
Total Gain:                     £95,500
Less: Annual Exempt Amount:     -£3,000
                               ─────────
Taxable Gain:                   £92,500

CGT at 24% (higher rate):      £22,200

Principal Private Residence Relief (PPR)

If you sell your main home — the property you live in as your principal private residence — you are normally completely exempt from CGT under Principal Private Residence Relief (PPR). This is an automatic relief; you do not need to claim it. However, there are important nuances:

• You can only have one PPR at a time (though married couples can elect which property qualifies during a transitional period)
• The last 9 months of ownership always qualify for PPR, even if you have moved out (this was reduced from 18 months in April 2020)
• If you have used the property partly for business (e.g., a home office that is exclusively used for work), that proportion may not qualify for PPR
• If you have let out part of the property, you may need to apportion the gain (though letting relief may apply)
• Grounds of up to 0.5 hectares (including the house) qualify for PPR; larger gardens may trigger a partial charge

Periods of Absence

If you lived in the property as your main home but were absent for certain periods, you may still qualify for PPR during those absences under specific rules:

• Up to 3 years of absence for any reason
• Any period of absence while working overseas
• Up to 4 years of absence while working elsewhere in the UK (provided your employer required the relocation)
• These "permitted absences" must be preceded and followed by a period of actual residence (subject to the last 9 months rule)

Lettings Relief

Lettings Relief was significantly restricted from April 2020. It now only applies if you shared occupation of the property with your tenant — a relatively unusual situation. Where it does apply, the relief is the lowest of:

• The amount of PPR relief claimed
• The gain attributable to the letting period
• £40,000

For most landlords who moved out of a property and then rented it out, Lettings Relief no longer applies. This was a significant change that increased CGT bills for many property investors.

60-Day Reporting Requirement

Since April 2020, UK residents must report and pay CGT on residential property disposals within 60 days of completion (previously 30 days, extended to 60 from October 2021). This is a separate requirement from Self Assessment and catches many people by surprise.

Key points about the 60-day reporting rule:

• The 60-day deadline runs from the date of completion, not the date of exchange
• You report through HMRC's "Report and pay Capital Gains Tax on UK property" service (a separate online service from Self Assessment)
• You must estimate your CGT liability and pay it within the same 60-day window
• You still need to report the gain on your Self Assessment return at the end of the year (with credit for tax already paid)
• The disposal must be reported even if you think no CGT is due (e.g., because the gain is covered by PPR)
• Late filing penalties mirror the Self Assessment regime: £100 initial penalty, then £10/day after 3 months
• Late payment interest runs from the 60-day deadline

The 60-day reporting requirement is one of the most commonly missed obligations in UK tax. If you are selling a property that is not your main home, make sure your solicitor or conveyancer flags this requirement at the point of sale.

Non-Resident CGT

Non-UK residents have been subject to CGT on the disposal of UK residential property since April 2015, and on all UK property (including commercial) since April 2019. The rules are broadly the same as for UK residents, with the following key differences:

• Non-residents can elect to be taxed only on gains accruing from 5 April 2015 onwards (the "rebasing" election)
• Non-residents must report all UK property disposals within 60 days, even if no tax is due
• Non-residents pay CGT at the same rates as UK residents (18%/24% for residential property)
• Double taxation agreements may provide relief where tax is also charged in the seller's country of residence
• Non-residents can still claim PPR if the property was their main home, but only if they satisfy a "day count" test of spending at least 90 midnights per year at the property

CGT Planning Strategies

There are several legitimate strategies to reduce or defer CGT on property:

1. Timing the Sale

If your gain will straddle two tax years, consider timing the completion to use two years' worth of annual exempt amounts. For a married couple, this could provide up to £12,000 of exemption (£3,000 × 2 × 2 years). Deferring completion from late March to early April achieves this.

2. Joint Ownership

If you own a property solely in your name but could have owned it jointly with your spouse or civil partner, the gain is taxed entirely on you. If the property were held jointly, each spouse would receive their own AEA (£3,000 each) and potentially be taxed at lower rates. Transferring a share of a property to a spouse before sale is a common planning strategy — transfers between spouses are made on a no-gain, no-loss basis.

3. Pension Contributions

Making pension contributions can reduce your taxable income, potentially bringing you into the basic rate band and reducing your CGT rate from 24% to 18%. On a £100,000 gain, this rate difference saves £6,000.

4. Offsetting Losses

Capital losses (from any asset, not just property) can be offset against capital gains in the same tax year. If you have loss-making investments, consider crystallising those losses in the same year as a property sale. Losses must be used in the year they arise if there are gains to offset; otherwise, they can be carried forward indefinitely.

5. Principal Private Residence Election

If you own more than one property, you can elect which one is your PPR. Strategic use of the PPR election — combined with the last 9 months rule — can significantly reduce CGT on a property you are about to sell.