Capital Gains Tax on Property When Selling (UK Guide 2025)
When you sell (or “dispose of”) a property in the UK that isn’t fully covered by exemptions, you may have to pay Capital Gains Tax (CGT). You must report and pay any Capital Gains Tax due on UK property within 60 days.
Introduction: Why Capital Gains Tax Matters When Selling Property
Capital Gains Tax (CGT) is one of the most important – and often misunderstood – taxes for UK property owners. With property prices rising steadily over the past decades, many homeowners, landlords, and investors face large CGT bills when selling.
Unlike Income Tax or Stamp Duty, CGT is only due when you sell or transfer an asset. That means the tax can often feel like a “surprise bill” – especially now the government has slashed the tax-free allowance from £12,300 (in 2022/23) to just £3,000 in 2024/25 and 2025/26.
This guide is written to be:
Clear and practical – with step-by-step explanations and examples.
Comprehensive – covering homeowners, landlords, investors, and non-residents.
Up to date – reflecting the 2025 tax rules and recent government changes.
Expert-led – based on HMRC guidance, legislation, and professional experience.
Whether you’re downsizing, selling a rental, or disposing of inherited property, this page will help you understand your CGT responsibilities – and how to reduce them legally.
1. What Is Capital Gains Tax (CGT) on Property?
CGT is a tax on the profit (gain) you make when you sell, gift, or otherwise dispose of a property.
Key points:
CGT applies to the gain, not the total sale price.
The gain is usually:
Sale proceeds – (Purchase price + Costs + Capital improvements)
Your main residence is usually exempt (Private Residence Relief).
Second homes, buy-to-let properties, land, inherited assets, and holiday homes are generally subject to CGT.
If you are non-UK resident, you are still liable for CGT on UK property.
2. When Does CGT Apply to Property Sales?
You will likely owe CGT if:
You sell a buy-to-let or second home.
You sell your main home, but part of it was rented out, used for business, or has extensive grounds (>5,000m²).
You inherit property and sell it at a gain compared to the value at inheritance.
You are a non-resident landlord disposing of UK residential property.
Exemptions (No CGT due):
Selling your only or main home (if fully covered by Private Residence Relief).
Transferring property to your spouse or civil partner.
Selling to a registered charity.
Making a loss (losses can be carried forward against future gains).
3. Current CGT Rates and Allowances (2024/25 and 2025/26)
The government reduced CGT rates and allowances in recent budgets, so it’s vital to understand the current system.
| Type of Property | Basic Rate Taxpayer (10%/18%) | Higher/Additional Rate Taxpayer (20%/24%) |
|---|---|---|
| Residential Property | 18% | 24% |
| Other Chargeable Assets (e.g. commercial property, land) | 10% | 20% |
Annual Exempt Amount (tax-free allowance):
| Tax Year | Annual Exempt Amount (Individuals) | Annual Exempt Amount (Trusts) |
|---|---|---|
| 2025/26 | £3,000 | £1,500 |
| 2024/25 | £3,000 | £1,500 |
| 2023/24 | £6,000 | £3,000 |
£3,000 per individual
£6,000 for married couples/civil partners if property is jointly owned
💡 Note: If part of your gain pushes you into the higher band, you’ll pay 18% on the lower portion and 24% on the excess.
4. How to Calculate Your CGT Liability
Step 1 – Work out the gain
Start with the sale price, subtract:
Purchase price
Legal, survey, and estate agent fees
Stamp Duty
Capital improvements (e.g., extension, new roof – not maintenance)
Step 2 – Apply allowances
Deduct the Annual Exempt Amount (£3,000).
Step 3 – Apply reliefs
E.g., Private Residence Relief, Lettings Relief.
Step 4 – Apply tax rates
18% for basic rate, 24% for higher rate.
Worked Example 1 – Higher-Rate Landlord
Bought buy-to-let in 2010 for £200,000
Selling in 2025 for £350,000
Buying & selling costs: £7,000
Capital improvements: £20,000
Gain = £350,000 – (£200,000 + £7,000 + £20,000) = £123,000
Annual Exempt Amount: £3,000
Taxable gain = £120,000
CGT owed (higher-rate taxpayer): £120,000 × 24% = £28,800
Worked Example 2 – Mixed-Rate Taxpayer
Same gain: £120,000
Income is £40,000, leaving £10,270 at basic rate before reaching higher rate.
£10,270 taxed at 18% = £1,848.60
Remaining £109,730 taxed at 24% = £26,335.20
Total CGT = £28,183.80
Worked Example 3 – Couple Selling Joint Property
Gain: £120,000 total
Owned 50/50 with spouse
Each reports £60,000 gain
Each deducts £3,000 allowance = £57,000 taxable gain each
If one spouse is basic rate, the household saves significantly by splitting the gain.
Capital Gains Tax Calculator
5. Allowable Costs and Deductions
You can deduct:
Stamp Duty Land Tax (SDLT)
Solicitor and conveyancing fees
Estate agent fees
Valuation costs
Costs of capital improvements (extensions, conversions, not redecorating)
💡 Keep all receipts and invoices – HMRC may ask for proof.
6. Reliefs That Can Reduce CGT
| Relief / Exemption | Who It Applies To | Key Conditions |
|---|---|---|
| Private Residence Relief (PRR) | Homeowners selling their main residence | Must have lived in the property as your only/main home |
| Lettings Relief | Homeowners who let out part of their main residence | Only available if you lived in the property at the same time |
| Business Asset Disposal Relief | Landlords running a furnished holiday let or property traders | Special rules apply, 10% CGT rate if conditions met |
| Transfers Between Spouses / Civil Partners | Married couples and civil partners | No CGT payable when transferring assets between each other |
7. Reporting and Paying CGT
Must report within 60 days of completion (UK residential property).
Use HMRC’s CGT on UK Property service.
Provide sale details, purchase costs, reliefs, and gain calculation.
Payment due at same time.
Penalties:
£100 fixed fine for late filing
Daily penalties after 3 months
Interest on late payment
8. How to Reduce Your CGT Bill (Legally)
Use both spouses’ allowances
Time sales across tax years
Offset capital losses from other investments
Gift property to spouse before sale to split gains
Keep records of all improvement costs
Consider longer-term planning for inheritance
9. CGT for Non-Residents
Non-UK residents must also pay CGT on UK property.
Key rules:
Applies to gains made after April 2015 (residential) or April 2019 (commercial).
Must still report within 60 days, even if no tax is due.
Overseas landlords must use HMRC’s online service.
10. Case Studies
Case Study 1 – Downsizing Retirees
A couple sell their family home (fully covered by PRR). No CGT due, but when they later sell a small rental they’ve owned for 15 years, they face a £40,000 CGT bill.
Case Study 2 – Accidental Landlord
Someone moves abroad temporarily, rents out their UK home, then returns and later sells. They get PRR for years of residence and partial Lettings Relief – reducing tax.
Case Study 3 – Inherited Flat
Beneficiary inherits flat worth £250,000 in 2020, sells for £325,000 in 2025. CGT applies only on £75,000 gain.
Case Study 4 – Non-Resident Investor
Overseas investor sells UK flat for £500,000. CGT applies only to the gain since 2015, not full period of ownership.
| Step | Without PRR | With PRR |
|---|---|---|
| Purchase Price | £200,000 | £200,000 |
| Sale Price | £350,000 | £350,000 |
| Gain Before Costs | £150,000 | £150,000 |
| Allowable Costs (Stamp Duty, legal, agents) | £10,000 | £10,000 |
| Net Gain | £140,000 | £140,000 |
| Private Residence Relief | £0 | £100,000 (periods lived in as main home) |
| Remaining Gain | £140,000 | £40,000 |
| Annual Exempt Amount (2025/26) | £3,000 | £3,000 |
| Taxable Gain | £137,000 | £37,000 |
| CGT Rate (Higher-Rate Taxpayer at 24%) | £32,880 | £8,880 |
| Total CGT Payable | £32,880 | £8,880 |
11. Recent Changes & Policy Outlook
CGT allowance cut to £3,000
Higher-rate property CGT reduced from 28% to 24%
Speculation about further alignment with Income Tax in future budgets
Government considering measures targeting property wealth and landlords
12. FAQs
Do I pay CGT on my main home?
Not usually, if PRR applies.
What happens if I sell within 12 months?
Still subject to CGT; there’s no minimum ownership period for exemption.
Do I need to file if no tax is due?
Yes – you must report within 60 days even if no gain arises.
What if I give property to my children?
Treated as a disposal at market value – CGT may apply.
Conclusion
Capital Gains Tax on property can be complex – but understanding the rules allows you to plan ahead, reduce liability, and avoid penalties.
Next steps:
Calculate your gain using HMRC’s CGT calculator.
Keep accurate records of purchase, sale, and improvements.
Seek advice from a tax professional for large or complex sales.