Capital Gains Tax on Property UK: What You Owe and How to Calculate It

Capital Gains Tax (CGT) applies when you sell a property that is not your main home. This includes buy-to-let properties, second homes, and gifted properties. Understanding how CGT is calculated can help you plan the timing of a sale and reduce your tax liability legally.

When Does CGT Apply to Property?

CGT applies to residential property sales in the UK where:

• The property is not (and has never been) your only or main home
• You are selling a property you inherited or were gifted that you did not use as your main home
• You previously lived in the property but have since let it (partial relief may apply)

CGT does not apply to your main home due to Private Residence Relief (see below).

CGT Rates on Residential Property (2026)

Following the October 2024 Autumn Budget, CGT rates on residential property increased:

These rates replaced the previous 18%/28% structure and apply to gains on residential property not covered by Private Residence Relief.

How to Calculate Your CGT Liability

The basic calculation is:

**Gain = Sale price − Purchase price − Allowable costs**

**Tax = (Gain − Annual exempt amount) × CGT rate**

Step 1: Calculate the Gain

Start with the sale price and deduct:

• Original purchase price
• Stamp duty paid on purchase
• Solicitor and agent fees on purchase
• Capital improvements (new kitchen, extension, loft conversion) — not routine maintenance
• Solicitor and agent fees on sale

**Do not deduct:** Mortgage interest payments, decorating costs, or routine repairs.

Step 2: Apply the Annual Exempt Amount

For 2025–26, the annual CGT exempt amount is £3,000. This is a ‘use it or lose it’ allowance that applies per person per tax year.

If a couple jointly owns a property, each can use their £3,000 allowance, reducing the taxable gain by £6,000 combined.

Step 3: Apply Private Residence Relief

If you lived in the property as your main home for part of the ownership period, you can claim Private Residence Relief for those years plus the last 9 months of ownership (regardless of whether you were living there).

**Example:** Owned for 10 years, lived in as main home for 6 years, then let for 4 years. Relief applies to 6 years + 0.75 years = 6.75/10 = 67.5% of the gain is exempt.

Step 4: Apply Letting Relief

If you lived in the property as your main home at the same time as letting it, Letting Relief may apply. Since April 2020, this relief is only available when the owner and tenant live in the property simultaneously (lodger arrangements). Maximum £40,000 per person, and capped at the Private Residence Relief amount.

Step 5: Identify Your Tax Rate

Your CGT rate depends on your total taxable income for the year, including the capital gain:

• If the gain (after allowances) falls within your basic rate income tax band: 18%
• For any portion above the basic rate band: 24%

Using the Property Passport UK CGT Calculator

The Capital Gains Tax calculator on Property Passport UK (available within your Property Passport dashboard for any owned property) allows you to input:

• Purchase price and date
• Sale price and date
• Costs on purchase and sale
• Capital improvements
• Period of main residence
• Your income tax band

The calculator produces an estimated CGT liability and applies Private Residence Relief and the annual exempt amount automatically.

Reporting and Paying CGT

Since April 2020, CGT on UK residential property must be reported and paid within **60 days** of completion. This is done through HMRC’s online ‘Report and Pay Capital Gains Tax’ service.

You must report even if the gain is covered by your annual exempt amount or Private Residence Relief. Late reporting incurs automatic penalties starting at £100.

Reducing Your CGT Liability

Legal ways to reduce CGT on a property sale:

• **Timing the sale** — if you expect to have a lower income year, selling in that year means more of the gain falls in the basic rate band
• **Using both partners’ allowances** — a transfer between spouses/civil partners before sale allows use of two annual exempt amounts (no CGT on the transfer)
• **Claiming all allowable costs** — ensure you have documented all capital improvements
• **Private residence nomination** — if you own two properties, you can nominate which is your main residence within 2 years of acquiring the second