Selling a property in the UK triggers Capital Gains Tax if you make a profit. For many people this comes as a surprise, particularly those selling a buy-to-let, a second home, or an inherited property. The rules changed significantly in October 2024, and the 60-day reporting deadline catches out a large number of sellers every year.
This guide explains how CGT on property works, what the current rates are, and what you need to do to stay compliant.
Quick Answer
If you sell a UK residential property that is not your main home and make a profit, you must report the gain and pay any tax due within 60 days of completion. The current rates are 18% for basic rate taxpayers and 24% for higher rate taxpayers (from October 2024). The first £3,000 of gains each year is tax-free.
When Does Capital Gains Tax Apply to Property?
CGT applies when you dispose of a property (sell it, gift it, or transfer it) and the proceeds are higher than your original cost plus certain allowable expenses.
Residential property sales that typically trigger CGT include:
- Buy-to-let properties
- Second homes and holiday lets
- Inherited properties (where the gain is calculated from the value at the date of inheritance)
- Properties transferred to family members at undervalue
Principal Private Residence (PPR) relief exempts your main home from CGT entirely, provided you have lived there as your only or main residence throughout the period of ownership. There are some exceptions and letting periods to consider, but for most people selling their family home, no CGT is due.
What Are the Current CGT Rates on Residential Property?
Following the Autumn Budget on 30 October 2024, CGT rates on residential property changed:
| Taxpayer | Rate |
|---|---|
| Basic rate (income up to £50,270) | 18% |
| Higher or additional rate | 24% |
These rates apply to residential property. The rates for other assets (shares, business assets) are different.
Your CGT rate depends on your total income for the year including the gain. If adding the gain pushes you from the basic rate band into the higher rate band, part of the gain is taxed at 18% and part at 24%.
The Annual Exempt Amount
Every individual has an annual CGT exempt amount, often called the annual allowance. From 2024/25 onwards this is £3,000. Gains below this threshold in a tax year are not taxed.
Note: this is per person, so a property owned jointly by two people each has the benefit of a separate £3,000 exempt amount.
What Counts as Your Gain?
Your gain is broadly: sale proceeds minus original purchase price, minus allowable costs.
Allowable costs you can deduct include:
- Stamp Duty Land Tax paid on purchase
- Solicitor and estate agent fees on purchase and sale
- Capital improvement costs (building an extension, converting a loft, major renovation)
- Costs incurred in establishing or defending your title to the property
You cannot deduct mortgage interest, routine repair and maintenance costs, or letting agent fees (these are deductible against rental income instead).
The 60-Day Reporting Rule
This is the rule that catches the most people. Since April 2020, if you sell a UK residential property and CGT is due, you must:
- Report the gain to HMRC using the online CGT on UK property account
- Pay any tax due
All of this must happen within 60 days of the completion date.
Missing the 60-day deadline triggers automatic penalties. The penalty starts at £100 and increases the longer the delay continues.
The 60-day rule applies even if you complete your annual Self Assessment return later in the year. The two reporting systems run in parallel.
Reliefs That Can Reduce Your CGT Bill
Principal Private Residence Relief: If the property was your main home for part of the ownership period, you may be entitled to partial relief. The final 9 months of ownership always qualify, regardless of occupancy.
Lettings Relief: This used to be a significant relief but is now only available in very limited circumstances where the owner was in shared occupancy with the tenant.
Annual Exempt Amount: The £3,000 threshold applies to every individual.
Loss Set-off: If you made a loss on another asset in the same tax year, you can offset that loss against your gain before tax is calculated.
FAQs
I inherited a property. How is my gain calculated? For inherited property, your base cost is the market value at the date of death, not the original purchase price. This often means a significant step-up in value, which reduces the taxable gain when you come to sell.
I sold my property and have not heard anything from HMRC. Do I still need to report it? Yes. The obligation to report and pay sits with you, not with HMRC. If CGT was due and you have not reported it, you should do so as soon as possible. The longer you leave it, the larger the penalties become.
My property was my main home but I rented it out for a period. Is CGT due? Possibly. PPR relief applies for the periods you lived there as your main home, plus the final 9 months. If there was a letting period in between, you may owe CGT on a proportion of the gain. A tax specialist can calculate the exact amount.
My partner and I own the property jointly. Do we both need to report the gain? Yes. Each owner must report their share of the gain separately, using their own HMRC account. Each person also has their own £3,000 annual exempt amount.
Can I reduce my CGT bill by transferring the property to my spouse before selling? Transfers between spouses and civil partners are treated as taking place at no gain or loss, which means the receiving spouse takes on your base cost. This can be useful for using a lower-rate band or the receiving partner’s annual exempt amount. However, anti-avoidance rules apply, so proper advice is essential before doing this.
Get the Right Advice Before You Sell
Our principal tax adviser is an ACCA and ATT qualified tax specialist and HMRC Registered Agent with over 25 years of personal tax experience, including CGT calculations, 60-day reporting, and property disposal planning. Kent Tax Specialists advises clients across Gravesend, Dartford, Maidstone, Medway, Sevenoaks, Tonbridge, Tunbridge Wells and the wider Kent area. Contact us today before or after your sale for accurate advice.
Also see: Capital Gains Tax in Gravesend | Capital Gains Tax in Maidstone | Capital Gains Tax in Sevenoaks
