Capital Gains Tax on Property in the UK: A Seller's Guide

When does capital gains tax apply to property?

Capital gains tax on property arises when you dispose of a residential or commercial property in the UK and realise a gain above your annual exempt amount. 'Disposal' usually means selling, but also includes gifting property to someone other than your spouse or civil partner, transferring it into a trust, or receiving compensation (such as an insurance payout after damage).

Your main residence—the home you live in and have nominated as your only or principal private residence—is normally exempt under private residence relief. CGT on a second home, buy-to-let properties, inherited properties you never lived in, and commercial property for sale all fall within the charge to tax if you make a profit.

If you own property jointly, each co-owner benefits from their own annual exempt amount and calculates their share of the gain separately. Married couples and civil partners can transfer property between themselves without triggering CGT, which can be useful for tax planning before a sale. Our team often advises sellers to review their ownership structure well in advance, particularly in high-value London markets where gains can be substantial.

Remember that selling your main home—the property you actually live in—usually attracts no CGT thanks to private residence relief, even if the sale price has risen sharply. But if you've let part of it out, used it for business, or owned it while living elsewhere, you may face a partial charge.

Calculate the gain: acquisition, disposal and allowable costs

Your chargeable gain is the difference between your disposal proceeds and your 'allowable costs'. Disposal proceeds are normally the sale price you achieve (the figure in your contract), though HMRC may substitute market value if you sell to a connected person below market rate or make a gift.

Allowable costs include the original purchase price, acquisition costs (solicitor and surveyor fees, Stamp Duty Land Tax you paid when buying), and capital improvements—such as an extension, loft conversion or structural work that added lasting value. Routine repairs, redecorating and maintenance do not count. You can also deduct the professional fees incurred when selling: estate-agent commission, solicitor's fees, and Energy Performance Certificate costs all reduce your gain.

For example, if you bought a flat in Clapham for £400,000, paid £12,000 in SDLT and legal fees, spent £50,000 on a kitchen extension, then sold it for £650,000 with £15,000 in selling costs, your gain would be £650,000 minus (£400,000 + £12,000 + £50,000 + £15,000) = £173,000. From that gain you subtract the annual exempt amount (£3,000 for 2024/25, according to gov.uk), leaving £170,000 chargeable.

If you inherited the property, your acquisition cost is usually the probate value at the date of death, not what the deceased originally paid. If you received it as a gift, you generally inherit the donor's base cost. These rules can be complex, so we recommend checking the specific figures with HMRC guidance or a tax adviser before marketing the property.

Keep every receipt and invoice: HMRC may ask for evidence of improvement costs and professional fees during an enquiry, and missing paperwork can mean a higher tax bill.

Understand private residence relief and lettings relief

Private residence relief exempts the gain attributable to periods when the property was your only or principal private residence and you actually lived there. If you occupied the property as your main home for the entire period of ownership, the whole gain is usually exempt—no CGT to pay, no return to file.

The final nine months of ownership always qualify for relief, even if you moved out to facilitate the sale (a common situation in London, where chains can be protracted). Before April 2020, the final-period exemption was 18 months; it is now nine months for everyone except disabled persons and those in long-term residential care.

If you lived in the property for only part of your ownership—perhaps you rented it out as a buy-to-let before moving in, or moved abroad for work—relief is apportioned. For instance, if you owned a house for ten years and lived there for six, roughly 60% of the gain may be exempt (plus the final nine months).

Lettings relief, which once gave up to £40,000 of additional relief to landlords who let out their main home, was restricted in April 2020. It now applies only when you let part of your home while still living there—sharing with a lodger, for example—and is capped at the lower of £40,000 or the amount of private residence relief. Selling a buy-to-let property that was never your residence attracts no lettings relief at all under current rules.

CGT on a second home and buy-to-let disposals

When you sell a property that has never been your main home—a weekend cottage in the Cotswolds, a pied-à-terre in Marylebone, or a rental flat in Canary Wharf—the entire gain (after allowable costs and the annual exempt amount) is chargeable to CGT. Rates for residential property are 18% for gains that fall within your remaining basic-rate income-tax band, and 24% on gains above that threshold, according to HMRC.

To determine which rate applies, HMRC treats your capital gain as the top slice of your income for the year. If your salary and other income already push you into the higher-rate band (above £50,270 for 2024/25), the whole property gain is taxed at 24%. If you're a basic-rate taxpayer, part of the gain may be taxed at 18% until it tips you into the higher band, with the remainder at 24%.

Landlords selling a buy-to-let will be familiar with this calculation, especially in London where property values—and therefore gains—can be significant. A portfolio landlord disposing of multiple properties in one tax year will aggregate all gains and pay tax on the total (less one annual exempt amount), which can result in a substantial bill. Our [landlord services](/landlord-services) team often suggests staggering disposals across tax years where timing permits, though market conditions and personal circumstances will always take priority.

Commercial property for sale is also subject to CGT, but at different rates: 10% and 20%, rather than 18% and 24%. If you own mixed-use property—residential with a shop or office below, common in central London—HMRC may apportion the gain, so specialist advice is worthwhile.

Report and pay CGT within 60 days of completion

Since 6 April 2020, UK residents must report and pay capital gains tax on UK residential property within 60 days of completion using HMRC's online UK property disposal return. This is a separate, immediate filing obligation—you cannot wait until your Self Assessment deadline the following January.

The 60-day clock starts on the completion date (the day legal title transfers and you receive sale proceeds), not the exchange of contracts. You file the return and pay the CGT due via your Government Gateway account on gov.uk, even if you have never completed Self Assessment before. If you already file annual tax returns, you must still submit the property return within 60 days, then report the disposal again in your main Self Assessment to reconcile any balancing payment or refund.

Missing the 60-day deadline triggers automatic late-filing penalties and potential interest on unpaid tax. We've seen London sellers caught out because their solicitor completed quickly and they were travelling or unaware of the new timetable. Setting a diary reminder as soon as you exchange contracts is sensible; many sellers instruct an accountant as soon as the sale is agreed to prepare the figures in advance.

If you make a loss on the property, you are not required to file a 60-day return—but you may wish to report it in your Self Assessment to carry the loss forward against future gains. Losses can be set against gains in the same tax year or carried forward indefinitely, a valuable relief if you plan further disposals.

Reduce your CGT bill: reliefs, timing and planning

Several strategies can lawfully reduce your capital gains tax liability. First, make full use of your annual exempt amount every tax year: if you and your spouse or civil partner each own properties, staggering sales so each of you realises a gain below the exempt amount can eliminate the charge altogether. Transferring a share of the property to your spouse before sale can also be effective, since interspousal transfers are tax-free.

Timing the completion date can matter. Completing just before the end of the tax year (5 April) rather than early April may give you an extra twelve months before the bill is due via Self Assessment, improving cash flow. Conversely, if you've already used this year's exempt amount on another gain, deferring completion into the new tax year secures a fresh £3,000 allowance.

If you've lived in the property at any point, ensure you claim every month of private residence relief—including absences for work, and the final nine months. Keep records of occupancy: council-tax bills, utility accounts and even dated photographs can prove residence if HMRC queries your claim.

For landlords selling a buy to let, consider whether capital expenditure—a new boiler, rewiring, or even an extension started before sale—can be completed and invoiced before completion to maximise allowable deductions. Always retain invoices and pay by bank transfer to create a clear audit trail.

Finally, if you are selling because you are relocating or downsizing and intend to purchase another property for sale in London, our [valuation](/valuation) and [sell](/sell) services can help you time your transactions to manage tax and cash flow efficiently across the chain.

Special situations: inheritance, divorce and non-residents

Inherited property is valued at probate value for CGT purposes, meaning your base cost is the market value on the date of death. Any gain accrues only from that point forward; Inheritance Tax and CGT do not overlap on the same appreciation. If you inherit a property and sell it quickly at the probate value, there may be little or no gain to report.

In divorce or dissolution, transfers between spouses or civil partners under a court order are usually exempt from CGT, provided the transfer happens in the tax year of separation or under a formal agreement. This allows couples to redistribute assets—including investment property or a second home—without triggering immediate tax charges, though the recipient inherits the original base cost and may face CGT on a future sale.

Non-UK residents have been liable to UK CGT on residential property disposals since April 2015, and on commercial property since April 2019. Non-residents must also file a UK property disposal return within 60 days and pay any tax due, even if they have no other UK tax obligations. The calculation is broadly the same, though reliefs and the interaction with double-tax treaties can be complex; specialist cross-border advice is essential.

If the property was your only UK home and you qualified for private residence relief throughout, the exemption still applies, but you must file a return to claim it—silence is not an option for non-residents.