Capital Gains Tax on Property UK 2026/27: The Complete Guide

Which Properties Are Subject to CGT?

Capital gains tax applies when you dispose of a UK property that is not your only or main home. This includes second homes and holiday properties, buy-to-let properties, inherited properties (where the gain is measured from the probate value), commercial property, land, and any property where only partial Private Residence Relief (PRR) applies. The disposal does not have to be a sale, gifting a property, transferring it to a company, or exchanging it can all trigger a CGT event.

Your main home is normally exempt from CGT through Private Residence Relief, which covers the full gain where you have lived in the property throughout your ownership. The final 9 months of ownership always count as a period of main residence, even if you have moved out. PRR can apply partially where the property was your main home for only part of the ownership period. A property that was never your main home, a pure investment property, has no PRR available.

Non-UK resident individuals who own UK residential property must report all disposals through HMRC's non-resident CGT service, whether or not tax is owed. This applies regardless of whether the property was their main residence.

CGT Rates on Residential Property 2026/27

Since the Autumn Budget of 30 October 2024, all residential property gains use the same rate structure as other assets: 18% for gains within the basic-rate band and 24% for gains in the higher or additional-rate band. Before October 2024, the higher-rate on property was 28%, the reduction to 24% was a significant change that applies to all disposals from 30 October 2024 onwards.

The rate that applies to your gain depends on how much of the basic-rate band remains after your other taxable income is accounted for. The basic-rate band runs from £12,570 (the personal allowance) to £50,270 (the higher-rate threshold). Your salary, pension and rental income fill this band first. Whatever gap remains up to £50,270 is available to absorb your property gain at 18%. Any gain that pushes beyond £50,270 is taxed at 24%.

Example: you have a salary of £38,000 and a property gain (after annual exempt amount) of £60,000. Your taxable income is £25,430 (£38,000 minus £12,570). The remaining basic-rate band is £37,700 minus £25,430 = £12,270. The first £12,270 of the property gain is taxed at 18% (£2,209). The remaining £47,730 is taxed at 24% (£11,455). Total CGT: £13,664.

Calculating the Gain: Allowable Costs

The CGT gain is the sale proceeds minus the allowable costs. Allowable costs include the original purchase price, buying costs (stamp duty land tax, solicitor fees, surveyor fees), improvement expenditure (capital works such as extensions, loft conversions, new kitchens that enhance the property, not repairs or maintenance), and selling costs (estate agent commission, solicitor fees, advertising costs). These costs must be evidenced with receipts or invoices.

Repairs and decoration are not allowable costs. Replacing a kitchen like-for-like is generally a repair; upgrading to a higher-specification kitchen may qualify as improvement expenditure. The distinction matters: every £1,000 of improvement correctly included reduces the gain by £1,000 and saves up to £240 in CGT. Many landlords and second homeowners underestimate their allowable improvement costs, overpaying CGT as a result.

For an inherited property, the purchase price is replaced by the probate value, the open market value of the property at the date of death. If the property has fallen in value since the date of death (which is possible in a falling market), you may have a capital loss rather than a gain. If it has risen, the gain is measured from the probate value, not what the deceased paid for it originally.

The Annual Exempt Amount

The annual exempt amount for 2026/27 is £3,000 per individual. This means the first £3,000 of net gains in the tax year is free from CGT. The AEA is applied after losses. If you have already used part of the AEA on other disposals earlier in the year, only the remaining balance is available against the property gain.

A married couple each have their own £3,000 AEA. If a property is jointly owned 50/50, each spouse's share of the gain can be reduced by their individual AEA, a combined £6,000 tax-free. For properties held in unequal shares, the gain is apportioned accordingly. Transferring a share of the property to a spouse before sale (no-gain/no-loss transfer) can optimise the use of both allowances and potentially access a lower rate if one spouse has lower income.

The 60-Day Reporting Rule

If you sell a UK residential property and a CGT liability arises, you must report the gain and pay an estimate of the CGT within 60 days of the completion date. This is done through HMRC's online UK property reporting service (https://www.gov.uk/report-and-pay-your-capital-gains-tax). This is separate from Self Assessment and must be done regardless of whether you complete a Self Assessment return. The 60-day clock starts on the completion date, not exchange of contracts.

If there is no CGT to pay (because the gain is within the AEA, covered by losses, or fully relieved by PRR), no 60-day report is required. If CGT is owed and you fail to report within 60 days, you face an automatic £100 penalty. This rises to £300 after 6 months and a further £300 after 12 months, plus interest on the unpaid tax. Late reporting is one of HMRC's most common CGT enforcement areas for property.

When you complete your Self Assessment return for the year, you reconcile the provisional 60-day payment against your final CGT calculation. If your provisional payment was too much (because you estimated income incorrectly), HMRC will repay the difference. If it was too little, you pay the shortfall through Self Assessment.

Private Residence Relief, When Your Home Is Also an Investment

Where a property has been both your main home and an investment property at different points during ownership, PRR applies proportionately. The exempt fraction is the number of months the property was your main home (plus any final 9-month period), divided by the total months of ownership. The gain attributable to the non-main-home period is fully chargeable to CGT.

Deemed occupation periods can also increase the PRR fraction. If you worked abroad or worked elsewhere in the UK (up to 4 years in the UK) and used the property as your main home before and after those periods, those absences may count as deemed occupation. The rules are detailed, HMRC's residence relief guidance in CG64300 onwards covers the conditions.

From April 2020, Lettings Relief, which previously reduced the gain on a former main home that had been let, was significantly restricted. It now only applies when the owner is in shared occupation with the tenant. For most landlords who used to live in a property before renting it out, Lettings Relief no longer applies.

Planning Strategies Before Sale

Transfer to a lower-income spouse before sale: If you own a property solely and your spouse or civil partner has a lower income (meaning more basic-rate band remains), transferring the property to them before sale is a no-gain/no-loss transaction. The gain is then assessed at their lower CGT rate. On a £100,000 gain, the difference between 18% and 24% is £6,000, a material saving. The transfer must be a genuine gift, and the property must actually belong to the receiving spouse.

Spread gain across tax years: If the property can be sold in tranches (unusual for residential property but possible for land), spreading the disposal across 5 April can use two years of annual exempt amounts. More commonly, if you have other assets with gains or losses, timing their disposal in the same year as the property sale can optimise the overall CGT position.

Pension contributions: Additional pension contributions in the year of sale reduce your taxable income, which creates more basic-rate band headroom for the property gain to fall at 18% rather than 24%. A £10,000 additional pension contribution by a higher-rate taxpayer saves £400 in income tax relief and can shift £10,000 of property gain from 24% to 18%, saving another £600 in CGT, for a combined saving of £1,000.